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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

________________________

FORM 10-Q

sfbs20250331_10qimg001.jpg

 

(Mark one)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2025

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _______to_______

 

Commission file number 001-36452

 

SERVISFIRST BANCSHARES, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware 26-0734029
(State or Other Jurisdiction of  (I.R.S. Employer
 Incorporation or Organization) Identification No.)

                                                              

2500 Woodcrest Place, Birmingham, Alabama 35209
(Address of Principal Executive Offices) (Zip Code)

 

(205) 949-0302

(Registrant's Telephone Number, Including Area Code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of exchange on which registered

Common stock, par value $.001 per share

SFBS

New York Stock Exchange

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or Section 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer ☒ Accelerated filer ☐  Non-accelerated filer ☐ Smaller reporting company Emerging growth company 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes  No ☒

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date.

 

Class  Outstanding as of April 29, 2025
Common stock, $.001 par value 54,612,062

 

 

 

 

 

 

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION 3
  Item 1. Consolidated Financial Statements 3
  Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 25
  Item 3. Quantitative and Qualitative Disclosures about Market Risk 40
  Item 4. Controls and Procedures 41
       
PART II. OTHER INFORMATION 41
  Item 1. Legal Proceedings 41
  Item 1A. Risk Factors 41
  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 41
  Item 3. Defaults Upon Senior Securities 41
  Item 4. Mine Safety Disclosures 41
  Item 5. Other Information 42
  Item 6. Exhibits 42
       

 

 
2

 

 

PART 1. FINANCIAL INFORMATION

 

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

 

SERVISFIRST BANCSHARES, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

 

   

March 31, 2025

   

December 31, 2024

 
   

(Unaudited)

    (1)  

ASSETS

               

Cash and due from banks

  $ 121,645     $ 116,394  

Interest-bearing balances due from depository institutions

    3,218,753       2,259,195  

Federal funds sold

    9,322       1,045  

Cash and cash equivalents

    3,349,720       2,376,634  

Available-for-sale debt securities, at fair value

    1,203,837       1,161,400  

Held-to-maturity debt securities (fair value of $639,455 and $639,496, respectively)

    701,713       714,853  

Restricted equity securities

    12,156       11,300  

Mortgage loans held for sale

    11,386       9,211  

Loans

    12,886,831       12,605,836  

Less allowance for credit losses

    (165,034 )     (164,458 )

Loans, net

    12,721,797       12,441,378  

Premises and equipment, net

    59,431       59,185  

Accrued interest and dividends receivable

    70,459       62,794  

Deferred tax asset, net

    58,924       61,748  

Other real estate owned and repossessed assets

    756       2,531  

Bank owned life insurance contracts

    301,924       299,787  

Goodwill

    13,615       13,615  

Other assets

    131,048       137,207  

Total assets

  $ 18,636,766     $ 17,351,643  

LIABILITIES AND STOCKHOLDERS' EQUITY

               

Liabilities:

               

Deposits:

               

Non-interest-bearing demand

  $ 2,647,577     $ 2,619,687  

Interest-bearing

    11,781,484       10,923,772  

Total deposits

    14,429,061       13,543,459  

Federal funds purchased

    2,358,326       1,993,728  

Other borrowings

    64,745       64,743  

Accrued interest and dividends payable

    29,055       28,026  

Other liabilities

    86,679       104,915  

Total liabilities

    16,967,866       15,734,871  

Stockholders' equity:

               

Preferred stock, par value $0.001 per share; 1,000,000 authorized and undesignated at March 31, 2025 and December 31, 2024

    -       -  

Common stock, par value $0.001 per share; 200,000,000 shares authorized: 54,601,217 shares issued and outstanding at March 31, 2025; and 54,569,427 shares issued and outstanding at December 31, 2024

    54       54  

Additional paid-in capital

    235,840       235,781  

Retained earnings

    1,457,614       1,412,616  

Accumulated other comprehensive loss

    (25,108 )     (32,179 )

Total stockholders' equity attributable to ServisFirst Bancshares, Inc.

    1,668,400       1,616,272  
Noncontrolling interest     500       500  

Total stockholders' equity

    1,668,900       1,616,772  

Total liabilities and stockholders' equity

  $ 18,636,766     $ 17,351,643  
                 

(1) Derived from audited financial statements.

               
                 

See Notes to Consolidated Financial Statements.

               

 

 

3

 

 

SERVISFIRST BANCSHARES, INC.

 

CONSOLIDATED STATEMENTS OF INCOME

 

(In thousands, except share and per share amounts)

 

(Unaudited)

 

 

   

Three Months Ended March 31,

 
   

2025

   

2024

 

Interest income:

               

Interest and fees on loans

  $ 196,936     $ 186,978  

Taxable securities

    16,023       15,979  

Nontaxable securities

    6       9  

Federal funds sold

    20       541  

Other interest and dividends

    28,111       23,203  

Total interest income

    241,096       226,710  

Interest expense:

               

Deposits

    94,745       104,066  

Borrowed funds

    22,798       20,149  

Total interest expense

    117,543       124,215  

Net interest income

    123,553       102,495  

Provision for credit losses

    6,630       4,535  

Net interest income after provision for credit losses

    116,923       97,960  

Noninterest income:

               

Service charges on deposit accounts

    2,558       2,150  

Mortgage banking

    613       678  

Credit card income

    1,968       2,155  

Bank-owned life insurance income

    2,137       3,231  

Other operating income

    1,001       694  

Total noninterest income

    8,277       8,908  

Noninterest expense:

               

Salaries and employee benefits

    22,879       22,986  

Equipment and occupancy

    3,722       3,557  

Third party processing and other services

    7,738       7,166  

Professional services

    1,933       1,464  

FDIC and other regulatory assessments

    2,854       3,905  

Other real estate owned

    33       30  

Other operating expense

    6,948       7,123  

Total noninterest expense

    46,107       46,231  

Income before income taxes

    79,093       60,637  

Provision for income taxes

    15,869       10,611  

Net income

    63,224       50,026  

Dividends on preferred stock

    -       -  

Net income available to common stockholders

  $ 63,224     $ 50,026  

Basic earnings per common share

  $ 1.16     $ 0.92  

Diluted earnings per common share

  $ 1.16     $ 0.92  
                 

See Notes to Consolidated Financial Statements.

               

 

 

4

 

 

SERVISFIRST BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

 

   

Three Months Ended

 
   

March 31,

 
   

2025

   

2024

 

Net income

  $ 63,224     $ 50,026  

Other comprehensive income, net of tax

               

Unrealized net holding gains arising during period from securities available for sale, net of tax of $2,404 and $2,373 for the three months ended March 31, 2025 and 2024, respectively

    7,175       1,138  

Amortization of net unrealized gains on securities transferred from available-for-sale to held-to-maturity, net of tax of $(35) and $(37) for the three months ended March 31, 2025 and 2024, respectively

    (104 )     (135 )

Other comprehensive income, net of tax

    7,071       1,003  

Comprehensive income

  $ 70,295     $ 51,029  
                 

See Notes to Consolidated Financial Statements.

               

 

 

 

 

 

 

 

 

5

 

 

SERVISFIRST BANCSHARES, INC.

 

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

 

(In thousands, except share amounts)

 

(Unaudited)

 

 

   

Three Months Ended March 31,

 
                                           

Accumulated

                 
                           

Additional

           

Other

           

Total

 
   

Common

   

Preferred

   

Common

   

Paid-in

   

Retained

   

Comprehensive

   

Noncontrolling

   

Stockholders'

 
   

Shares

   

Stock

   

Stock

   

Capital

   

Earnings

   

Loss

   

Interest

   

Equity

 

Balance, January 1, 2024

    54,461,580     $ -     $ 54     $ 232,605     $ 1,254,841     $ (47,595 )   $ 500     $ 1,440,405  
Impact of adoption ASU 2023-02, net of tax     -       -       -       -       (2,269 )     -       -       (2,269 )
Adjusted balance, January 1, 2024     54,461,580       -       54       232,605       1,252,572       (47,595 )     500       1,438,136  

Common dividends declared, $0.30 per share

    -       -       -       -       (16,353 )     -       -       (16,353 )

Issue restricted shares pursuant to stock incentives, net of forfeitures

    39,912       -       -       -       -       -       -       -  
Issue shares of common stock upon exercise of stock options     6,286       -       -       130       -       -       -       130  

2,014 shares of common stock withheld in net settlement upon exercise of stock options

    -       -       -       (133 )     -       -       -       (133 )

Stock-based compensation expense

    -       -       -       958       -       -       -       958  

Other comprehensive income, net of tax

    -       -       -       -       -       1,003       -       1,003  

Net income

    -       -       -       -       50,026       -       -       50,026  

Balance, March 31, 2024

    54,507,778     $ -     $ 54     $ 233,560     $ 1,286,245     $ (46,592 )   $ 500     $ 1,473,767  
                                                                 
                                                                 

Balance, January 1, 2025

    54,569,427     $ -     $ 54     $ 235,781     $ 1,412,616     $ (32,179 )   $ 500     $ 1,616,772  

Common dividends declared, $0.34 per share

    -       -       -       -       (18,292 )     -       -       (18,292 )

Dividends on nonvested restricted stock recognized as compensation expense

    -       -       -       -       66       -       -       66  

Issue restricted shares pursuant to stock incentives, net of forfeitures

 

22,816

   

 

-

 

   

 

-

 

   

 

-

 

   

 

-

 

   

 

-

 

   

 

-

 

   

 

-

 

 

Issue shares of common stock upon exercise of stock options

    8,974       -       -       230       -       -       -       230  

3,276 shares of common stock withheld in net settlement upon exercise of stock options

    -       -       -       (1,035 )     -       -       -       (1,035 )

Stock-based compensation expense

    -       -       -       864       -       -       -       864  

Other comprehensive income, net of tax

    -       -       -       -       -       7,071       -       7,071  

Net income

    -       -       -       -       63,224       -       -       63,224  

Balance, March 31, 2025

    54,601,217     $ -     $ 54     $ 235,840     $ 1,457,614     $ (25,108 )   $ 500     $ 1,668,900  

 

See Notes to Consolidated Financial Statements.

                                                               

 

 

 

6

 

 

SERVISFIRST BANCSHARES, INC.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(In thousands) (Unaudited)

 

 

   

Three Months Ended March 31,

 
   

2025

   

2024

 

OPERATING ACTIVITIES

               

Net income

  $ 63,224     $ 50,026  

Adjustments to reconcile net income to net cash provided by operations

               

Deferred tax expense

    455       2,626  

Provision for credit losses

    6,630       4,535  

Depreciation

    1,223       1,099  

Accretion on acquired loans

    51       49  

Amortization of investments in tax credit partnerships

    2,904       2,837  

Net accretion of debt securities

    (6 )     (197 )

Increase in accrued interest and dividends receivable

    (7,665 )     (2,226 )

Stock-based compensation expense

    864       958  

Increase (decrease) in accrued interest and dividends payable

    1,029       (723 )

Proceeds from sale of mortgage loans held for sale

    39,104       37,635  

Originations of mortgage loans held for sale

    (40,666 )     (39,475 )

Gain on sale of mortgage loans held for sale

    (613 )     (678 )

Net gain on sale of other real estate owned and repossessed assets

    (318 )     (95 )

Increase in cash surrender value of life insurance contracts

    (2,137 )     (3,231 )

Net change in other assets, liabilities, and other operating activities

    (16,125 )     333  

Net cash provided by operating activities

    47,954       53,473  

INVESTMENT ACTIVITIES

               

Purchases of debt securities available-for-sale

    (114,929 )     (198,269 )

Proceeds from maturities, calls and paydowns of debt securities available-for-sale

    82,077       24,724  

Purchases of debt securities held-to-maturity

    -       (9,936 )

Proceeds from maturities, calls and paydowns of debt securities held-to-maturity

    13,001       124,904  

Purchases of restricted equity securities

    (856 )     (1,074 )

Investment in tax credit partnerships and SBIC

    1,201       (25 )

Net increase in loans

    (287,124 )     (223,799 )

Purchases of premises and equipment

    (1,469 )     (1,077 )

Proceeds from sale of other real estate owned and repossessed assets

    2,117       690  

Net cash used in investing activities

    (305,982 )     (283,862 )

FINANCING ACTIVITIES

               

Net increase (decrease) in non-interest-bearing deposits

    27,890       (15,462 )

Net increase (decrease) in interest-bearing deposits

    857,712       (506,601 )

Net increase in federal funds purchased

    364,598       88,604  

Proceeds from exercise of stock options

    230       130  

Taxes paid in net settlement of tax obligation upon exercise of stock options

    (1,036 )     (133 )

Dividends paid on common stock

    (18,280 )     (16,338 )

Net cash provided by (used in) financing activities

    1,231,114       (449,800 )

Net increase (decrease) in cash and cash equivalents

    973,086       (680,189 )

Cash and cash equivalents at beginning of period

    2,376,634       2,131,088  

Cash and cash equivalents at end of period

  $ 3,349,720     $ 1,450,899  

SUPPLEMENTAL DISCLOSURE

               

Cash paid for:

               

Interest

  $ 116,514     $ 124,938  

Income taxes

    3,129       6,977  

NONCASH TRANSACTIONS

               

Other real estate acquired in settlement of loans

  $ 24     $ 90  

Dividends on nonvested restricted stock reclassified as compensation expense

    66       -  

Dividends declared

    18,292       16,353  
                 

See Notes to Consolidated Financial Statements.

               

 

 

7

 

 

SERVISFIRST BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2025

(Unaudited)

 

NOTE 1 - GENERAL

 

The accompanying consolidated financial statements in this report have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, including Regulation S-X and the instructions for Form 10-Q, and have not been audited. These consolidated financial statements do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. In the opinion of management, all adjustments necessary to present fairly the consolidated financial position and the consolidated results of operations for the interim periods have been made. All such adjustments are of a normal nature. The consolidated results of operations are not necessarily indicative of the consolidated results of operations that ServisFirst Bancshares, Inc. (the “Company”) may achieve for future interim periods or the entire year. For further information, refer to the consolidated financial statements and footnotes included in the Company’s Form 10-K for the year ended December 31, 2024.

 

The Company adopted ASU 2026-02 - Investments - Equity Method and Joint Ventures (Topic 323) - Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method, effective January 1, 2024, but recorded the adoption during the second quarter of 2024, including a $2.3 million retained earnings adjustment which was calculated as of the beginning of that year. The Consolidated Statement of Stockholders' Equity for the three months ended March 31, 2024 have been revised to reflect that retained earnings adjustment.

 

All reported amounts are in thousands except share and per share data.

 

 

NOTE 2 - CASH AND CASH EQUIVALENTS

 

Cash on hand, cash items in process of collection, amounts due from banks, and federal funds sold are included in cash and cash equivalents.

 

 

NOTE 3 - EARNINGS PER COMMON SHARE

 

Basic earnings per common share are computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per common share include the dilutive effect of additional potential common shares issuable under stock options. The difference in earnings per share under the two-class method was not significant for the three month periods ended March 31, 2025 and 2024.

 

   

Three Months Ended March 31,

 
   

2025

   

2024

 
   

(In Thousands, Except Shares and Per Share Data)

 

Earnings per common share

               

Weighted average common shares outstanding

    54,586,274       54,491,019  

Net income available to common stockholders

  $ 63,224     $ 50,026  

Basic earnings per common share

  $ 1.16     $ 0.92  
                 

Weighted average common shares outstanding

    54,586,274       54,491,019  

Dilutive effects of assumed conversions and exercise of stock options and warrants

    70,356       104,365  

Weighted average common and dilutive potential common shares outstanding

    54,656,630       54,595,384  

Net income available to common stockholders

  $ 63,224     $ 50,026  

Diluted earnings per common share

  $ 1.16     $ 0.92  

 

8

 

 

NOTE 4 - SECURITIES

 

The amortized cost and fair value of available-for-sale and held-to-maturity securities at March 31, 2025 and December 31, 2024 are summarized as follows:

 

           

Gross

   

Gross

         
   

Amortized

   

Unrealized

   

Unrealized

   

Fair

 
   

Cost

   

Gain

   

Loss

   

Value

 

March 31, 2025

 

(In Thousands)

 

Debt Securities Available-for-Sale

                               

U.S. Treasury securities

  $ 674,821     $ 2,244     $ (2 )   $ 677,063  

Mortgage-backed securities

    232,819       398       (20,068 )     213,149  

State and municipal securities

    10,514       1       (830 )     9,685  

Corporate debt

    321,765       -       (17,825 )     303,940  

Total

  $ 1,239,919     $ 2,643     $ (38,725 )   $ 1,203,837  

Debt Securities Held-to-Maturity

                               

U.S. Treasury securities

  $ 249,457     $ -     $ (15,765 )   $ 233,692  

Mortgage-backed securities

    444,165       109       (46,105 )     398,169  

State and municipal securities

    8,091       -       (497 )     7,594  

Total

  $ 701,713     $ 109     $ (62,367 )   $ 639,455  
                                 

December 31, 2024

                               

Debt Securities Available-for-Sale

                               

U.S. Treasury securities

  $ 617,350     $ 580     $ (444 )   $ 617,486  

Mortgage-backed securities

    243,435       49       (24,210 )     219,274  

State and municipal securities

    10,516       1       (1,000 )     9,517  

Corporate debt

    335,758       38       (20,673 )     315,123  

Total

  $ 1,207,059     $ 668     $ (46,327 )   $ 1,161,400  

Debt Securities Held-to-Maturity

                               

U.S. Treasury securities

  $ 249,403     $ -     $ (19,632 )   $ 229,771  

Mortgage-backed securities

    457,365       14       (55,150 )     402,229  

State and municipal securities

    8,085       -       (589 )     7,496  

Total

  $ 714,853     $ 14     $ (75,371 )   $ 639,496  

 

The amortized cost and fair value of debt securities as of March 31, 2025 and December 31, 2024 by contractual maturity are shown below. Actual maturities may differ from contractual maturities of mortgage-backed securities since the mortgages underlying the securities may be called or prepaid with or without penalty. Therefore, these securities are not included in the maturity categories along with the other categories of debt securities.

 

   

March 31, 2025

   

December 31, 2024

 
   

Amortized Cost

   

Market Value

   

Amortized Cost

   

Market Value

 
   

(In Thousands)

 

Debt securities available-for-sale

                               

Due within one year

  $ 243,991     $ 244,466     $ 223,145     $ 223,477  

Due from one to five years

    496,438       496,600       478,868       475,985  

Due from five to ten years

    263,270       246,647       258,611       240,114  

Due after ten years

    3,401       2,975       3,000       2,550  

Mortgage-backed securities

    232,819       213,149       243,435       219,274  
    $ 1,239,919     $ 1,203,837     $ 1,207,059     $ 1,161,400  
                                 

Debt securities held-to-maturity

                               

Due within one year

  $ 250     $ 250     $ 250     $ 250  

Due from one to five years

    257,298       241,036       256,743       236,586  

Due from five to ten years

    -       -       495       431  

Mortgage-backed securities

    444,165       398,169       457,365       402,229  
    $ 701,713     $ 639,455     $ 714,853     $ 639,496  

 

All mortgage-backed securities are with government-sponsored enterprises (“GSEs”) such as Federal National Mortgage Association, Government National Mortgage Association, Federal Home Loan Bank, and Federal Home Loan Mortgage Corporation.

 

Restricted equity securities are comprised entirely of restricted investment in Federal Home Loan Bank stock for membership requirements.

 

The carrying value of investment securities pledged to secure public funds on deposit and for other purposes as required by law was $1.58 billion and $1.43 billion as of March 31, 2025 and December 31, 2024, respectively.

 

9

 

The following table identifies, as of March 31, 2025 and December 31, 2024, the Company’s investment securities that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for 12 or more months.

 

   

Less Than Twelve Months

   

Twelve Months or More

   

Total

 
   

Gross

           

Gross

           

Gross

         
   

Unrealized

           

Unrealized

           

Unrealized

         
   

Losses

   

Fair Value

   

Losses

   

Fair Value

   

Losses

   

Fair Value

 
   

(In Thousands)

 

March 31, 2025

                                               

Debt Securities available-for-sale

                                               

U.S. Treasury securities

  $ (2 )   $ 29,490     $ -     $ -     $ (2 )   $ 29,490  

Mortgage-backed securities

    (1 )     351       (20,067 )     174,934       (20,068 )     175,285  

State and municipal securities

    -       -       (830 )     9,240       (830 )     9,240  

Corporate debt

    (413 )     19,127       (17,412 )     284,812       (17,825 )     303,939  

Total

  $ (416 )   $ 48,968     $ (38,309 )   $ 468,986     $ (38,725 )   $ 517,954  

Debt Securities held-to-maturity

                                               

U.S. Treasury securities

  $ -     $ -     $ (15,765 )   $ 233,692     $ (15,765 )   $ 233,692  

Mortgage-backed securities

    (194 )     27,978       (45,911 )     352,468       (46,105 )     380,446  

State and municipal securities

    -       -       (497 )     7,344       (497 )     7,344  

Total

  $ (194 )   $ 27,978     $ (62,173 )   $ 593,504     $ (62,367 )   $ 621,482  

December 31, 2024

                                               

Debt Securities available-for-sale

                                               

U.S. Treasury securities

  $ (445 )   $ 250,547     $ -     $ -     $ (445 )   $ 250,547  

Mortgage-backed securities

  $ (6 )   $ 577     $ (24,204 )   $ 179,178     $ (24,210 )   $ 179,755  

State and municipal securities

    -       -       (1,000 )     9,072       (1,000 )     9,072  

Corporate debt

    (1,307 )     25,596       (19,366 )     284,489       (20,673 )     310,085  

Total

  $ (1,758 )   $ 276,720     $ (44,570 )   $ 472,739     $ (46,328 )   $ 749,459  

Debt Securities held-to-maturity

                                               

U.S. Treasury securities

  $ -     $ -     $ (19,632 )   $ 229,771     $ (19,632 )   $ 229,771  

Mortgage-backed securities

    (536 )     40,115       (54,614 )     356,215       (55,150 )     396,330  

State and municipal securities

    -       -       (589 )     7,247       (589 )     7,247  

Total

  $ (536 )   $ 40,115     $ (74,835 )   $ 593,233     $ (75,371 )   $ 633,348  

 

At March 31, 2025 and December 31, 2024, no allowance for credit losses (“ACL”) has been recognized on available-for-sale debt securities in an unrealized loss position as the Company does not believe any of the debt securities are credit impaired. This is based on the Company’s analysis of the risk characteristics, including credit ratings, and other qualitative factors related to available-for-sale debt securities. The issuers of these debt securities continue to make timely principal and interest payments under the contractual terms of the securities. The Company does not intend to sell these debt securities and it is more likely than not that the Company will not be required to sell the debt securities before recovery of their amortized cost, which may be at maturity. The unrealized losses are due to increases in market interest rates over the yields available at the time the debt securities were purchased. Management measures expected credit losses on held-to-maturity securities on a collective basis by major security type with each type sharing similar risk characteristics and considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. With regard to U.S. Treasury and mortgage-backed securities issued by the U.S. government, or agencies thereof, it is expected that the securities will not be settled at prices less than the amortized cost bases of the securities as such securities are backed by the full faith and credit of and/or guaranteed by the U.S. government. Accordingly, no allowance for credit losses has been recorded for these securities. With regard to securities issued by states and municipal subdivisions and other held-to-maturity securities, management considers (i) issuer bond ratings, (ii) historical loss rates for given bond ratings, (iii) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities, and (iv) internal forecasts. Historical loss rates associated with securities having similar grades as those in our portfolio have generally not been significant. Furthermore, as of March 31, 2025 and 2024, there were no past due principal or interest payments associated with these securities. Based upon (i) the issuer’s strong bond ratings and (ii) a zero historical loss rate, no allowance for credit losses has been recorded for held-to-maturity State and Municipal Securities as such amount is not material at March 31, 2025 and 2024. All debt securities in an unrealized loss position as of March 31, 2025 continue to perform as scheduled and the Company does not believe there is a possible credit loss or that an allowance for credit loss on these debt securities is necessary.

 

 

NOTE 5 LOANS

 

The loan portfolio is classified based on the underlying collateral utilized to secure each loan for financial reporting purposes. This classification is consistent with the Quarterly Report of Condition and Income filed by ServisFirst Bank with the Federal Deposit Insurance Corporation (“FDIC”).

 

Commercial, financial and agricultural - Includes loans to business enterprises issued for commercial, industrial, agricultural production and/or other professional purposes. These loans are generally secured by equipment, inventory, and accounts receivable of the borrower and repayment is primarily dependent on business cash flows.

 

10

 

Real estate construction – Includes loans secured by real estate to finance land development or the construction of industrial, commercial or residential buildings. Repayment is dependent upon the completion and eventual sale, refinance or operation of the related real estate project.

 

Owner-occupied commercial real estate mortgage – Includes loans secured by nonresidential properties for which the primary source of repayment is the cash flow from the ongoing operations conducted by the party that owns the property.

 

1-4 family real estate mortgage – Includes loans secured by residential properties, including home equity lines of credit. Repayment is primarily dependent on the personal cash flow of the borrower.

 

Non-owner occupied commercial real estate mortgage – Includes loans secured by non-owner occupied properties, including office buildings, industrial buildings, warehouses, retail buildings, and multifamily residential properties. Repayment is primarily dependent on income generated from the underlying collateral.

 

Consumer – Includes loans to individuals not secured by real estate. Repayment is dependent upon the personal cash flow of the borrower.

 

The following table details the Company’s loans at March 31, 2025 and December 31, 2024:

 

   

March 31,

   

December 31,

 
   

2025

   

2024

 
   

(Dollars In Thousands)

 

Commercial, financial and agricultural

  $ 2,924,533     $ 2,869,894  

Real estate - construction

    1,599,410       1,489,306  

Real estate - mortgage:

               

Owner-occupied commercial

    2,543,819       2,547,143  

1-4 family mortgage

    1,494,189       1,444,623  

Non-owner occupied commercial

    4,259,566       4,181,243  

Subtotal: Real estate - mortgage

    8,297,574       8,173,009  

Consumer

    65,314       73,627  

Total Loans

    12,886,831       12,605,836  

Less: Allowance for credit losses

    (165,034 )     (164,458 )

Net Loans

  $ 12,721,797     $ 12,441,378  
                 
                 

Commercial, financial and agricultural

    22.69 %     22.77 %

Real estate - construction

    12.41 %     11.81 %

Real estate - mortgage:

               

Owner-occupied commercial

    19.74 %     20.21 %

1-4 family mortgage

    11.59 %     11.46 %

Non-owner occupied commercial

    33.06 %     33.17 %

Subtotal: Real estate - mortgage

    64.39 %     64.84 %

Consumer

    0.51 %     0.58 %

Total Loans

    100.00 %     100.00 %

 

The credit quality of the loan portfolio is summarized no less frequently than quarterly using categories similar to the standard asset classification system used by the federal banking agencies. The following table presents credit quality indicators for the credit loss portfolio segments and classes. These categories are utilized to develop the associated allowance for credit losses using historical losses adjusted for current economic conditions defined as follows:

 

 

Pass – loans that are well protected by the current net worth and paying capacity of the obligor (or obligors, if any) or by the fair value, less cost to acquire and sell, of any underlying collateral.

 

Special Mention – loans with potential weakness that may, if not reversed or corrected, weaken the credit or inadequately protect the Company’s position at some future date. These loans are not adversely classified and do not expose an institution to sufficient risk to warrant an adverse classification.

 

Substandard – loans that exhibit well-defined weakness or weaknesses that presently jeopardize debt repayment. These loans are characterized by the distinct possibility that the institution will sustain some loss if the weaknesses are not corrected.

 

Doubtful – loans that have all the weaknesses inherent in loans classified substandard, plus the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values highly questionable and improbable.

 

11

 

The table below presents loan balances classified by credit quality indicator, loan type and based on year of origination as of March 31, 2025:

 

March 31, 2025

 

2025

   

2024

   

2023

   

2022

   

2021

   

Prior

   

Revolving

   

Revolving lines of credit converted to term loans

   

Total

 
   

(In Thousands)

 

Commercial, financial and agricultural

                                                                       

Pass

  $ 254,177     $ 396,478     $ 148,943     $ 295,638     $ 240,464     $ 276,773     $ 1,160,812     $ 27,126     $ 2,800,411  

Special Mention

    -       1,663       2,425       20,345       2,578       7,747       17,861       577       53,196  

Substandard - Accruing

    -       225       -       928       345       25,879       5,829       878       34,084  

Substandard - Non-accrual

    -       -       1,291       2,005       5,052       8,982       19,491       21       36,842  

Total Commercial, financial and agricultural

  $ 254,177     $ 398,366     $ 152,659     $ 318,916     $ 248,439     $ 319,381     $ 1,203,993     $ 28,602     $ 2,924,533  

Current-period gross write-offs

  $ -     $ -     $ 532     $ 181     $ 886     $ 343     $ 150     $ 323     $ 2,415  
                                                                         

Real estate - construction

                                                                       

Pass

  $ 52,440     $ 457,301     $ 300,727     $ 482,750     $ 131,628     $ 45,508     $ 74,795     $ -     $ 1,545,149  

Special Mention

    -       326       532       28,493       16,478       -       1       -       45,830  

Substandard - Accruing

    -       -       -       -       -       945       -       -       945  

Substandard - Non-accrual

    -       -       3,666       3,820       -       -       -       -       7,486  

Total Real estate - construction

  $ 52,440     $ 457,627     $ 304,925     $ 515,063     $ 148,106     $ 46,453     $ 74,796     $ -     $ 1,599,410  

Current-period gross write-offs

  $ -       -       -       46       -     $ -     $ -     $ -     $ 46  
                                                                         

Owner-occupied commercial

                                                                       

Pass

  $ 77,324     $ 361,503     $ 151,933     $ 508,482     $ 452,473     $ 833,111     $ 62,169     $ 5,905     $ 2,452,900  

Special Mention

    -       7,917       6,077       1,197       27,427       21,086       6,823       -       70,527  

Substandard - Accruing

    -       -       416       1,136       -       2,373       -       -       3,925  

Substandard - Non-accrual

    -       772       -       2,886       6,682       5,847       280       -       16,467  

Total Owner-occupied commercial

  $ 77,324     $ 370,192     $ 158,426     $ 513,701     $ 486,582     $ 862,417     $ 69,272     $ 5,905     $ 2,543,819  

Current-period gross write-offs

  $ -     $ 2,790     $ -     $ -     $ -     $ -     $ -     $ -     $ 2,790  
                                                                         

1-4 family mortgage

                                                                       

Pass

  $ 104,306     $ 275,081     $ 120,726     $ 304,519     $ 182,756     $ 129,523     $ 352,805     $ 5,104     $ 1,474,820  

Special Mention

    -       -       -       2,944       1,224       5,703       2,631       806       13,308  

Substandard - Accruing

    -       -       -       -       -       403       192       -       595  

Substandard - Non-accrual

    -       -       899       798       1,376       1,658       735       -       5,466  

Total 1-4 family mortgage

  $ 104,306     $ 275,081     $ 121,625     $ 308,261     $ 185,356     $ 137,287     $ 356,363     $ 5,910     $ 1,494,189  

Current-period gross write-offs

  $ -     $ -     $ -     $ -     $ -     $ -     $ 31     $ -     $ 31  
                                                                         

Non-owner occupied commercial

                                                                       

Pass

  $ 168,611     $ 475,112     $ 168,852     $ 1,407,848     $ 882,887     $ 1,005,623     $ 63,823     $ 6,928     $ 4,179,684  

Special Mention

    -       -       -       12,534       54,554       2,714       -       651       70,453  

Substandard - Accruing

    -       -       -       -       -       2,638       -       -       2,638  

Substandard - Non-accrual

    -       -       -       4,198       2,593       -       -       -       6,791  

Total Non-owner occupied commercial

  $ 168,611     $ 475,112     $ 168,852     $ 1,424,580     $ 940,034     $ 1,010,975     $ 63,823     $ 7,579     $ 4,259,566  

Current-period gross write-offs

  $ -       -       -       750       -     $ -     $ -     $ -     $ 750  
                                                                         

Consumer

                                                                       

Pass

  $ 19,726     $ 6,698     $ 2,402     $ 2,237     $ 1,182     $ 3,218     $ 29,110     $ -     $ 64,573  

Special Mention

    -       -       -       -       -       -       -       -       -  

Substandard - Accruing

    -       -       -       -       -       -       -       -       -  

Substandard - Non-accrual

    -       -       -       -       -       741       -       -       741  

Total Consumer

  $ 19,726     $ 6,698     $ 2,402     $ 2,237     $ 1,182     $ 3,959     $ 29,110     $ -     $ 65,314  

Current-period gross write-offs

  $ -       -       -       -       -     $ 60     $ -     $ -     $ 60  
                                                                         

Total Loans

                                                                       

Pass

  $ 676,584     $ 1,972,173     $ 893,583     $ 3,001,474     $ 1,891,390     $ 2,293,756     $ 1,743,514     $ 45,063     $ 12,517,537  

Special Mention

    -       9,906       9,034       65,513       102,261       37,250       27,316       2,034       253,314  

Substandard - Accruing

    -       225       416       2,064       345       32,238       6,021       878       42,187  

Substandard - Non-accrual

    -       772       5,856       13,707       15,703       17,228       20,506       21       73,793  

Total Loans

  $ 676,584     $ 1,983,076     $ 908,889     $ 3,082,758     $ 2,009,699     $ 2,380,472     $ 1,797,357     $ 47,996     $ 12,886,831  

Current-period gross write-offs

  $ -     $ 2,790     $ 532     $ 977     $ 886     $ 403     $ 181     $ 323     $ 6,092  

 

12

 

Loans by credit quality indicator, loan type and based on year of origination as of December 31, 2024 were as follows:

 

December 31, 2024

 

2024

   

2023

   

2022

   

2021

   

2020

   

Prior

   

Revolving

   

Revolving lines of credit converted to term loans

   

Total

 
   

(In Thousands)

         

Commercial, financial and agricultural

                                                                       

Pass

  $ 529,002     $ 171,139     $ 331,476     $ 273,304     $ 120,088     $ 195,011     $ 1,121,196     $ 248     $ 2,741,464  

Special Mention

    1,767       666       12,260       2,442       3,254       10,001       21,647       -       52,037  

Substandard - Accruing

    1,064       -       987       349       364       25,620       22,317       -       50,701  

Substandard -Non-accrual

    -       1,177       2,049       8,201       271       8,513       5,481       -       25,692  

Total Commercial, financial and agricultural

  $ 531,833     $ 172,982     $ 346,772     $ 284,296     $ 123,977     $ 239,145     $ 1,170,641     $ 248     $ 2,869,894  

Current-period gross write-offs

  $ 36     $ 1,002     $ -     $ 52     $ 675     $ 4,327     $ 2,851     $ 3,172     $ 12,115  
                                                                         

Real estate - construction

                                                                       

Pass

  $ 367,275     $ 292,379     $ 506,542     $ 150,307     $ 32,330     $ 16,083     $ 72,793     $ -     $ 1,437,710  

Special Mention

    259       3,100       28,224       16,477       -       -       -       -       48,060  

Substandard - Accruing

    -       590       2,000       -       -       946       -       -       3,536  

Substandard -Non-accrual

    -       -       -       -       -       -       -       -       -  

Total Real estate - construction

  $ 367,534     $ 296,069     $ 536,766     $ 166,784     $ 32,330     $ 17,029     $ 72,793     $ -     $ 1,489,306  

Current-period gross write-offs

  $ -     $ -     $ -     $ -     $ -     $ -     $ -     $ -     $ -  
                                                                         

Owner-occupied commercial

                                                                       

Pass

  $ 377,351     $ 168,561     $ 503,351     $ 467,790     $ 276,795     $ 594,794     $ 65,269     $ 802     $ 2,454,713  

Special Mention

    10,148       6,410       1,373       22,087       5,441       16,912       4,961       -       67,332  

Substandard - Accruing

    3,562       417       1,147       6,681       2,169       2,378       -       -       16,354  

Substandard -Non-accrual

    -       -       2,886       -       79       5,779       -       -       8,744  

Total Owner-occupied commercial

  $ 391,061     $ 175,388     $ 508,757     $ 496,558     $ 284,484     $ 619,863     $ 70,230     $ 802     $ 2,547,143  

Current-period gross write-offs

  $ -     $ -     $ -     $ 100     $ -     $ 137     $ -     $ -     $ 237  
                                                                         

1-4 family mortgage

                                                                       

Pass

  $ 294,602     $ 126,953     $ 319,472     $ 188,104     $ 65,673     $ 78,629     $ 351,240     $ -     $ 1,424,673  

Special Mention

    -       469       2,523       2,943       1,124       6,628       2,428       -       16,115  

Substandard - Accruing

    -       -       -       -       -       403       381       -       784  

Substandard -Non-accrual

    -       265       646       855       405       380       500       -       3,051  

Total 1-4 family mortgage

  $ 294,602     $ 127,687     $ 322,641     $ 191,902     $ 67,202     $ 86,040     $ 354,549     $ -     $ 1,444,623  

Current-period gross write-offs

  $ -     $ 28     $ 61     $ 62     $ -     $ 129     $ 481     $ -     $ 761  
                                                                         

Non-owner occupied commercial

                                                                       

Pass

  $ 479,275     $ 174,415     $ 1,449,886     $ 888,829     $ 367,100     $ 670,317     $ 70,161     $ 246     $ 4,100,229  

Special Mention

    -     $ -     $ 8,304     $ 53,926     $ -     $ 3,376     $ -     $ -       65,606  

Substandard - Accruing

    -       -       4,584       -       -       9,565       -       -       14,149  

Substandard -Non-accrual

    -       -       384       875       -       -       -       -       1,259  

Total Non-owner occupied commercial

  $ 479,275     $ 174,415     $ 1,463,158     $ 943,630     $ 367,100     $ 683,258     $ 70,161     $ 246     $ 4,181,243  

Current-period gross write-offs

  $ -     $ -     $ -     $ -     $ -     $ -     $ -     $ -     $ -  
                                                                         

Consumer

                                                                       

Pass

  $ 33,004     $ 2,941     $ 2,462     $ 1,346     $ 1,234     $ 2,505     $ 29,335     $ -     $ 72,827  

Special Mention

    -       -       -       -       -       -       45       -       45  

Substandard - Accruing

    -       -       -       -       -       -       -       -       -  

Substandard -Non-accrual

    -       -       -       -       -       755       -       -       755  

Total Consumer

  $ 33,004     $ 2,941     $ 2,462     $ 1,346     $ 1,234     $ 3,260     $ 29,380     $ -     $ 73,627  

Current-period gross write-offs

  $ 19     $ 8     $ -     $ -     $ -     $ 75     $ 469     $ -     $ 571  
                                                                         

Total Loans

                                                                       

Pass

  $ 2,080,509     $ 936,388     $ 3,113,189     $ 1,969,680     $ 863,220     $ 1,557,340     $ 1,709,994     $ 1,296     $ 12,231,616  

Special Mention

    12,174       10,645       52,684       97,875       9,819       36,917       29,081       -       249,195  

Substandard - Accruing

    4,626       1,007       8,718       7,030       2,533       38,912       22,698       -       85,524  

Substandard -Non-accrual

    -       1,442       5,965       9,931       755       15,427       5,981       -       39,501  

Total Loans

  $ 2,097,309     $ 949,482     $ 3,180,556     $ 2,084,516     $ 876,327     $ 1,648,596     $ 1,767,754     $ 1,296     $ 12,605,836  

Current-period gross write-offs

  $ 55     $ 1,038     $ 61     $ 214     $ 675     $ 4,668     $ 3,801     $ 3,172     $ 13,684  

 

13

 

Loans by performance status as of March 31, 2025 and December 31, 2024 were as follows:

 

March 31, 2025

 

Performing

   

Nonperforming

   

Total

 
   

(In Thousands)

 

Commercial, financial and agricultural

  $ 2,887,647     $ 36,886     $ 2,924,533  

Real estate - construction

    1,591,924       7,486       1,599,410  

Real estate - mortgage:

                       

Owner-occupied commercial

    2,527,352       16,467       2,543,819  

1-4 family mortgage

    1,488,723       5,466       1,494,189  

Non-owner occupied commercial

    4,252,774       6,792       4,259,566  

Total real estate - mortgage

    8,268,849       28,725       8,297,574  

Consumer

    64,507       807       65,314  

Total

  $ 12,812,927     $ 73,904     $ 12,886,831  

 

December 31, 2024

 

Performing

   

Nonperforming

   

Total

 
   

(In Thousands)

 

Commercial, financial and agricultural

  $ 2,844,164     $ 25,730     $ 2,869,894  

Real estate - construction

    1,488,645       661       1,489,306  

Real estate - mortgage:

                       

Owner-occupied commercial

    2,538,399       8,744       2,547,143  

1-4 family mortgage

    1,439,332       5,291       1,444,623  

Non-owner occupied commercial

    4,179,984       1,259       4,181,243  

Total real estate - mortgage

    8,157,715       15,294       8,173,009  

Consumer

    72,846       781       73,627  

Total

  $ 12,563,370     $ 42,466     $ 12,605,836  

 

14

 

Loans by past due status as of March 31, 2025 and December 31, 2024 were as follows:

 

March 31, 2025

 

Past Due Status (Accruing Loans)

                                 
                           

Total Past

   

Total

                   

Nonaccrual

 
   

30-59 Days

   

60-89 Days

   

90+ Days

   

Due

   

Nonaccrual

   

Current

   

Total Loans

   

With No ACL

 
   

(In Thousands)

         

Commercial, financial and agricultural

  $ 5,190     $ 5,642     $ 45     $ 10,877     $ 36,841     $ 2,876,815     $ 2,924,533     $ 32,741  

Real estate - construction

    28,493       16,430       -       44,923       7,486       1,547,001       1,599,410       7,486  

Real estate - mortgage:

                                                               

Owner-occupied commercial

    -       1,231       -       1,231       16,467       2,526,121       2,543,819       14,145  

1-4 family mortgage

    2,697       157       -       2,854       5,466       1,485,869       1,494,189       1,818  

Non-owner occupied commercial

    13,322       47,904       -       61,226       6,792       4,191,548       4,259,566       5,498  

Total real estate - mortgage

    16,019       49,292       -       65,311       28,725       8,203,538       8,297,574       21,461  

Consumer

    102       15       66       183       741       64,390       65,314       -  

Total

  $ 49,804     $ 71,379     $ 111     $ 121,294     $ 73,793     $ 12,691,744     $ 12,886,831     $ 61,688  

 

December 31, 2024

 

Past Due Status (Accruing Loans)

                                 
                           

Total Past

   

Total

                   

Nonaccrual

 
   

30-59 Days

   

60-89 Days

   

90+ Days

   

Due

   

Nonaccrual

   

Current

   

Total Loans

   

With No ACL

 
   

(In Thousands)

         

Commercial, financial and agricultural

  $ 9,218     $ 8,469     $ 38     $ 17,725     $ 25,692     $ 2,826,477       2,869,894     $ 22,266  

Real estate - construction

    6,046       15,898       661       22,605       -       1,466,701       1,489,306       -  

Real estate - mortgage:

                                                               

Owner-occupied commercial

    9,494       2,478       -       11,972       8,744       2,526,427       2,547,143       8,644  

1-4 family mortgage

    1,157       3,111       2,240       6,508       3,051       1,435,064       1,444,623       2,787  

Non-owner occupied commercial

    4,432       -       -       4,432       1,259       4,175,552       4,181,243       729  

Total real estate - mortgage

    15,083       5,589       2,240       22,912       13,054       8,137,043       8,173,009       12,160  

Consumer

    83       34       26       143       755       72,729       73,627       -  

Total

  $ 30,430     $ 29,990     $ 2,965     $ 63,385     $ 39,501     $ 12,502,950       12,605,836     $ 34,426  

 

Under the current expected credit losses (“CECL”) methodology, the ACL is measured on a collective basis for pools of loans with similar risk characteristics. For loans that do not share similar risk characteristics with the collectively evaluated pools, evaluations are performed on an individual basis. For all loan segments collectively evaluated, losses are predicted over a period of time determined to be reasonable and supportable, and at the end of the reasonable and supportable forecast period losses are reverted to long-term historical averages. The estimated loan losses for all loan segments are adjusted for changes in qualitative factors not inherently considered in the quantitative analyses.

 

The Company uses the discounted cash flow (“DCF”) method to estimate ACL for all loan pools except for commercial revolving lines of credit and credit cards. For all loan pools utilizing the DCF method, the Company utilizes and forecasts national unemployment rate as a loss driver. The Company also utilizes and forecasts GDP growth as a second loss driver for its agricultural and consumer loan pools. Consistent forecasts of the loss drivers are used across the loan segments. At March 31, 2025 and December 31, 2024, the Company utilized a reasonable and supportable forecast period of twelve months followed by a six-month straight-line reversion to long term averages. The Company leveraged economic projections from reputable and independent sources to inform its loss driver forecasts. The Company expects national unemployment to rise and national GDP growth rate to decline compared to the December 31, 2024 forecast.

 

The Company uses a loss-rate method to estimate expected credit losses for its commercial revolving lines of credit and credit card pools. The commercial revolving lines of credit pool incorporates a probability of default (“PD”) and loss given default (“LGD”) modeling approach. This approach involves estimating the pool average life and then using historical correlations of default and loss experience over time to calculate the lifetime PD and LGD. These two inputs are then applied to the outstanding pool balance. The credit card pool incorporates a remaining life modeling approach, which utilizes an attrition-based method to estimate the remaining life of the pool. A quarterly average loss rate is then calculated using the Company’s historical loss data. The model reduces the pool balance quarterly on a straight-line basis over the estimated life of the pool. The quarterly loss rate is multiplied by the outstanding balance at each period-end resulting in an estimated loss for each quarter. The sum of estimated loss for all quarters is the total calculated reserve for the pool. Management has also applied the loss-rate method to commercial and industrial (“C&I”) lines of credit and to credit cards due to their generally short-term nature. An expected loss ratio is applied based on internal and peer historical losses.

 

15

 

Each loan pool is adjusted for qualitative factors not inherently considered in the quantitative analyses. The qualitative adjustments either increase or decrease the quantitative model estimation. The Company considers factors that are relevant within the qualitative framework, which include the following: lending policy, changes in nature and volume of loans, staff experience, changes in volume and trends of problem loans, concentration risk, trends in underlying collateral values, external factors, quality of loan review system and other economic conditions.

 

Inherent risks in the loan portfolio will differ based on type of loan. Specific risk characteristics by loan portfolio segment are listed below:

 

Commercial and industrial loans include risks associated with borrower’s cash flow, debt service coverage and management’s expertise. These loans are subject to the risk that the Company may have difficulty converting collateral to a liquid asset if necessary, as well as risks associated with degree of specialization, mobility and general collectability in a default situation. These commercial loans may be subject to many different types of risks, including fraud, bankruptcy, economic downturn, deteriorated or non-existent collateral, and changes in interest rates.

 

Real estate construction loans include risks associated with the borrower’s credit-worthiness, contractor’s qualifications, borrower and contractor performance, and the overall risk and complexity of the proposed project. Construction lending is also subject to risks associated with sub-market dynamics, including population, employment trends and household income. During times of economic stress, this type of loan has typically had a greater degree of risk than other loan types.

 

Real estate mortgage loans consist of loans secured by commercial and residential real estate. Commercial real estate lending is dependent upon successful management, marketing and expense supervision necessary to maintain the property. Repayment of these loans may be adversely affected by conditions in the real estate market or the general economy. Also, commercial real estate loans typically involve relatively large loan balances to a single borrower. Residential real estate lending risks are generally less significant than those of other loans. Real estate lending risks include fluctuations in the value of real estate, bankruptcies, economic downturns and customer financial problems.

 

Consumer loans carry a moderate degree of risk compared to other loans. They are generally more risky than traditional residential real estate loans but less risky than commercial loans. Risk of default is usually determined by the well-being of the local economies. During times of economic stress, there is usually some level of job loss both nationally and locally, which directly affects the ability of the consumer to repay debt.

 

The following table presents changes in the ACL, segregated by loan type, for the three months ended March 31, 2025 and March 31, 2024.

 

   

Commercial,

           

Owner-

           

Non-owner

                 
   

financial and

   

Real estate -

   

occupied

   

1-4 family

   

occupied

                 
   

agricultural

   

construction

   

commercial

   

mortgage

   

commercial

   

Consumer

   

Total

 
   

(In Thousands)

 
   

Three Months Ended March 31, 2025

 

Allowance for credit losses on Loans:

                                                       

Balance at January 1, 2025

  $ 55,330     $ 38,597     $ 22,302     $ 14,096     $ 31,328       2,805     $ 164,458  

Charge-offs

    (2,415 )     (46 )     (2,790 )     (31 )     (750 )     (60 )     (6,092 )

Recoveries

    171       -       -       -       -       27       198  

Provision for credit losses on loans

    (568 )     3,258       1,818       1,181       1,275       (494 )     6,470  

Balance at March 31, 2025

  $ 52,518     $ 41,809     $ 21,330     $ 15,246     $ 31,853       2,278     $ 165,034  
                                                         
   

Three Months Ended March 31, 2024

 

Allowance for credit losses:

                                                       

Balance at January 1, 2024

  $ 52,121     $ 44,658     $ 17,702     $ 12,029     $ 25,395     $ 1,412     $ 153,317  

Charge-offs

    (1,842 )     -       -       (67 )     -       (98 )     (2,007 )

Recoveries

    199       -       6       -       -       9       214  

Provision for credit losses on loans

    544       1,031       683       1,032       860       218       4,368  

Balance at March 31, 2024

  $ 51,022     $ 45,689     $ 18,391     $ 12,994     $ 26,255     $ 1,541     $ 155,892  

 

16

 

We maintain an ACL on unfunded commercial lending commitments and letters of credit to provide for the risk of loss inherent in these arrangements. The ACL is computed using a methodology similar to that used to determine the ACL for loans, modified to take into account the probability of a drawdown on the commitment. The ACL on unfunded loan commitments is classified as a liability account on the Consolidated Balance Sheets within other liabilities, while the corresponding provision for these credit losses is recorded as a component of provision for credit losses. The ACL on unfunded commitments was $768,000 at March 31, 2025 and $608,000 at December 31, 2024. The provision expense for unfunded commitments for the three months ended March 31, 2025 and 2024 was $160,000 and $167,000, respectively.

 

Loans that no longer share similar risk characteristics with collectively evaluated pools are estimated on an individual basis. A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. The following table summarizes collateral-dependent gross loans held for investment by collateral type as follows:

 

           

Accounts

                           

ACL

 

March 31, 2025

 

Real Estate

   

Receivable

   

Equipment

   

Other

   

Total

   

Allocation

 
   

(In Thousands)

 

Commercial, financial and agricultural

  $ 30,859     $ 1,656     $ 6,642     $ 38,199     $ 77,356     $ 15,127  

Real estate - construction

    7,944       -       -       1,686       9,630       741  

Real estate - mortgage:

                                               

Owner-occupied commercial

    12,443       -       -       70       12,513       1,723  

1-4 family mortgage

    5,166       -       202       802       6,170       1,581  

Non-owner occupied commercial

    4,435       -       730       937       6,102       1,323  

Total real estate - mortgage

    22,044       -       932       1,809       24,785       4,627  

Consumer

    -       -       -       -       -       -  

Total

  $ 60,847     $ 1,656     $ 7,574     $ 41,694     $ 111,771     $ 20,495  
                                                 
                                             
           

Accounts

                           

ACL

 

December 31, 2024

 

Real Estate

   

Receivable

   

Equipment

   

Other

   

Total

   

Allocation

 
    (In Thousands)  

Commercial, financial and agricultural

  $ 18,901     $ 1,721     $ 7,449     $ 42,684     $ 70,755     $ 17,615  

Real estate - construction

    2,590       -       -       946       3,536       -  

Real estate - mortgage:

                                               

Owner-occupied commercial

    24,935       -       -       78       25,013       2,890  

1-4 family mortgage

    3,719       -       109       -       3,828       287  

Non-owner occupied commercial

    14,533       -       -       875       15,408       2,081  

Total real estate - mortgage

    43,187       -       109       953       44,249       5,258  

Consumer

    -       -       -       755       755       755  

Total

  $ 64,678     $ 1,721     $ 7,558     $ 45,338     $ 119,295     $ 23,628  

 

The table below details the amortized cost basis at the end of the reporting period for loans made to borrowers experiencing financial difficulty that were modified during the three months ended March 31, 2025 and 2024:

 

   

Three Months Ended March 31, 2025

 
                                 
    Term    

Payment

           

Percentage of

 
    Extensions    

Deferral

   

Total

   

Total Loans

 
           

(In Thousands)

 
                                 

Commercial, financial and agricultural

  $ -     $ -     $ -       - %

Real estate - construction

    -       -       -       - %

Owner-occupied commercial

    -       11,114       11,114       0.09 %

1-4 family mortgage

    -       -       -       - %

Non-owner occupied commercial

    -       -       -       - %

Total

  $ -     $ 11,114     $ 11,114       0.09 %
                                 
   

Three Months Ended March 31, 2024

 
                                 
    Term    

Payment

           

Percentage of

 
    Extensions    

Deferral

   

Total

   

Total Loans

 
            (In Thousands)  
                                 

Commercial, financial and agricultural

  $ 5,568     $ -     $ 5,568       0.05 %

Real estate - construction

    973       -       973       0.01 %

Owner-occupied commercial

    1,501       -       1,501       0.01 %

1-4 family mortgage

    424       -       424       - %

Non-owner occupied commercial

    9,913       -       9,913       0.08 %

Total

  $ 18,379     $ -     $ 18,379       0.15 %

 

 

17

 

The following table summarizes the financial impacts of loan modifications made to borrowers experiencing financial difficulty during the three months ended March 31, 2025 and 2024:

 

   

Three Months Ended March 31, 2025

 
           

Total Payment

 
   

Term Extensions

   

Deferral

 
   

(In months)

   

(In Thousands)

 

Commercial, financial and agricultural

    -     $ -  

Real estate - construction

    -       -  

Owner-occupied commercial

    3       132  

1-4 family mortgage

    -       -  

Non-owner occupied commercial

    -       -  
                 
   

Three Months Ended March 31, 2024

 
           

Total Payment

 
   

Term Extensions

   

Deferral

 
   

(In months)

   

(In Thousands)

 

Commercial, financial and agricultural

    1 to 6     $ -  

Real estate - construction

    12       -  

Owner-occupied commercial

    12       -  

1-4 family mortgage

    12       -  

Non-owner occupied commercial

    12       -  

 

No loans modified on or after March 31, 2024 were past due greater than 30 days or on non-accrual as of March 31, 2025.

 

As of March 31, 2025, the Company did not have any loans made to borrowers experiencing financial difficulty that were modified during the first quarter of 2025 that subsequently defaulted. For purposes of this disclosure, default is defined as 90 days past due and still accruing or placement on nonaccrual status. Beginning in the second quarter of 2024, the policy surrounding the definition of borrowers experiencing financial difficulty was refined.

 

 

 

NOTE 6 LEASES

 

The Company leases space under non-cancelable operating leases for several of its banking offices and certain office equipment. The leases have remaining terms up to 15 years. At March 31, 2025, the Company had lease right-of-use assets and lease liabilities totaling $24.8 million and $25.8 million, respectively, compared to $26.1 million and $27.1 million, respectively at December 31, 2024, which are reflected in other assets and other liabilities, respectively, in the Company’s Consolidated Balance Sheets.

 

Maturities of operating lease liabilities are as follows:

 

   

March 31, 2025

 
   

(In Thousands)

 

2025 (remaining)

  $ 4,197  

2026

    4,808  

2027

    4,206  

2028

    3,362  

2029

    2,795  

thereafter

    10,963  

Total lease payments

    30,331  

Less: imputed interest

    (4,491 )

Present value of operating lease liabilities

  $ 25,840  

 

18

 

As of March 31, 2025, the weighted average remaining term of operating leases was 7.7 years and the weighted average discount rate used in the measurement of operating lease liabilities was 3.81%.

 

Operating cash flows related to leases were $1.5 million and $1.4 million for the three months ended March 31, 2025 and 2024, respectively.

 

Lease costs during the three months ended March 31, 2025 and 2024 were as follows (in thousands):

 

   

Three Months Ended March 31,

 
   

2025

   

2024

 

Operating lease cost

  $ 1,491     $ 1,393  

Variable lease cost

    226       216  

Sublease income

    (4 )     (5 )

Net lease cost

  $ 1,713     $ 1,604  

 

 

NOTE 7 - EMPLOYEE AND DIRECTOR BENEFITS

 

Stock Incentive Plan

 

At March 31, 2025, the Company had a stock incentive plan as described below. The compensation cost that has been charged to earnings for the plan was approximately $864,000 and $958,000 for the three months ended March 31, 2025 and 2024, respectively.

 

The Company’s 2009 Amended and Restated Stock Incentive Plan authorizes the grant of up to 5,550,000 shares and allows for the issuance of Stock Appreciation Rights, Restricted Stock, Stock Options, Non-stock Share Equivalents, Performance Shares or Performance Units. The plan allows for the grant of incentive stock options and non-qualified stock options, and option awards are granted with an exercise price equal to the fair market value of the Company’s common stock at the date of grant. The maximum term of the options granted under the plan is ten years.

 

The Company estimates the fair value of each stock option award using a Black-Scholes-Merton valuation model, which incorporates the assumptions noted in the following table. Expected volatilities are based on the Company’s trading price history. The expected term for options granted is based on the short-cut method and represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

 

There were no grants of stock options during first quarters of 2025 and 2024.

 

The following table summarizes stock option activity during the three months ended March 31, 2025 and 2024:

 

                   

Weighted

         
           

Weighted

   

Average

         
           

Average

   

Remaining

         
           

Exercise

   

Contractual

   

Aggregate

 
   

Shares

   

Price

   

Term (years)

   

Intrinsic Value

 
                           

(In Thousands)

 

Three Months Ended March 31, 2025:

                               

Outstanding January 1, 2025

    80,450     $ 26.03       1.9     $ 4,723  

Exercised

    (12,250 )     15.76       -       819  

Outstanding March 31, 2025

    68,200     $ 27.88       2.0     $ 3,732  
                                 

Exercisable March 31, 2025

    68,200     $ 27.88       2.0     $ 3,732  
                                 

Three Months Ended March 31, 2024:

                               

Outstanding January 1, 2024

    165,800     $ 24.35       2.9     $ 7,211  

Exercised

    (8,300 )     15.74       0.9       420  

Outstanding March 31, 2024

    157,500     $ 24.80       2.7     $ 6,744  
                                 

Exercisable March 31, 2024

    140,000     $ 22.63       2.1     $ 6,122  

 

19

 

As of March 31, 2025, there were no unvested stock options.

 

Restricted Stock and Performance Shares

 

The Company periodically grants restricted stock awards that vest upon time-based service conditions. Dividend payments are made during the vesting period. The value of restricted stock is determined to be the current value of the Company’s stock, and this total value will be recognized as compensation expense over the vesting period. As of March 31, 2025, there was $5.9 million of total unrecognized compensation cost related to unvested time-based restricted stock. The cost is expected to be recognized evenly over the remaining 2.5 years of the restricted stock’s vesting period.

 

The Company periodically grants performance shares that give plan participants the opportunity to earn between 0% and 150% of the number of performance shares granted based on achieving certain performance metrics. The number of performance shares earned is determined by reference to the Company’s total shareholder return relative to a peer group of other publicly traded banks and bank holding companies during the performance period. The performance period is generally three years, beginning on January 1st of the year of the grant. The fair value of performance shares are determined using a Monte Carlo simulation model on the grant date. As of March 31, 2025, there was $1.2 million of total unrecognized compensation cost related to unvested performance shares. As of March 31, 2025, unvested performance shares had a weighted average remaining time to vest of 1.6 years.

 

   

Restricted Stock

   

Performance Shares

 
                                 
           

Weighted

           

Weighted

 
            Average Grant             Average Grant  
   

Shares

   

Date Fair Value

   

Shares

   

Date Fair Value

 

Three Months Ended March 31, 2025:

                               

Unvested at January 1, 2025

    145,837     $ 66.35       30,065     $ 70.45  

Granted

    20,104       90.49       6,316       84.64  

Additional performance share attainment

    -       -       290       89.68  

Vested

    (25,229 )     59.42       (5,813 )     75.28  

Forfeited

    (1,266 )     79.02       -       -  

Unvested at March 31, 2025

    139,446     $ 70.97       30,858     $ 72.63  
                                 

Three Months Ended March 31, 2024:

                               

Unvested at January 1, 2024

    158,298     $ 58.08       31,944     $ 58.25  

Granted

    21,835       67.12       8,894       67.90  

Additional performance share attainment

    -       -       6,216       68.18  

Vested

    (25,107 )     48.19       (18,653 )     37.05  

Forfeited

    (576 )     71.43       -       -  

Unvested at March 31, 2024

    154,450     $ 60.92       28,401     $ 77.37  

 

 

NOTE 8 - DEPOSITS

 

Deposits at March 31, 2025 and December 31, 2024 were as follows:

 

   

March 31,

   

December 31,

 
   

2025

   

2024

 
   

(In Thousands)

 

Noninterest-bearing demand

  $ 2,647,577     $ 2,619,687  

Interest-bearing checking

    10,317,159       9,511,161  

Savings

    102,593       102,088  

Time deposits, $250,000 and under

    371,693       367,216  

Time deposits, over $250,000

    990,039       943,307  
    $ 14,429,061     $ 13,543,459  

 

20

 

The scheduled maturities of time deposits at March 31, 2025 were as follows:

 

   

(In Thousands)

 

2025

  $ 1,155,018  

2026

    170,495  

2027

    24,020  

2028

    2,879  

2029

    8,837  

Thereafter

    483  

Total

  $ 1,361,732  

 

 

NOTE 9 - DERIVATIVES

 

The Company has entered into forward loan sale commitments with secondary market investors to deliver loans on a “best efforts delivery” basis, which do not meet the definition of a derivative instrument. When a rate is committed to a borrower, it is based on the best price that day and locked with the investor for the customer for a 30-day period. In the event the loan is not delivered to the investor, the Company has no risk or exposure with the investor. The interest rate lock commitments related to loans that are originated for later sale are classified as derivatives. The fair values of the Company’s agreements with investors and rate lock commitments to customers as of March 31, 2025 and December 31, 2024 were not material.

 

 

NOTE 10 RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

 

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 requires enhanced income tax disclosures primarily related to the rate reconciliation and income taxes paid information to provide more transparency by requiring (i) consistent categories and greater disaggregation of information in the rate reconciliation table and (ii) income taxes paid, net of refunds, to be disaggregated by jurisdiction based on an established threshold. This ASU is effective for public business entities for annual periods beginning after December 15, 2024. The Company adopted the standard as of January 1, 2025, using the retrospective method of adoption, and will evaluate the level of disclosure in the rate reconciliation, as well as determining if a quantitative threshold is established requiring additional information of the reconciling items in our annual report of the December 31, 2025 consolidated financial statements.

 

 

NOTE 11 RECENT ACCOUNTING PRONOUNCEMENTS

 

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40). The amendments improve the disclosures about a public business entity’s expenses and address requests from investors for more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation, amortization, and depletion) in commonly presented expense captions (such as cost of sales and research and development). The amendments are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. We are currently evaluating the impact these changes may have on our consolidated financial statements.

 

 

NOTE 12 - FAIR VALUE MEASUREMENT

 

Measurement of fair value under U.S. GAAP establishes a hierarchy that prioritizes observable and unobservable inputs used to measure fair value, as of the measurement date, into three broad levels, which are described below:

 

Level 1:          Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

Level 2:          Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.

Level 3:          Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

 

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and also considers counterparty credit risk in its assessment of fair value.

 

21

 

Debt Securities. Where quoted prices are available in an active market, securities are classified within Level 1 of the hierarchy. Level 1 securities include highly liquid government securities such as U.S. Treasuries and exchange-traded equity securities. For securities traded in secondary markets for which quoted market prices are not available, the Company generally relies on pricing services provided by independent vendors. Such independent pricing services are to advise the Company on the carrying value of the securities available for sale portfolio. As part of the Company’s procedures, the price provided from the service is evaluated for reasonableness given market changes. When a questionable price exists, the Company investigates further to determine if the price is valid. If needed, other market participants may be utilized to determine the correct fair value. The Company has also reviewed and confirmed its determinations in discussions with the pricing service regarding their methods of price discovery. Securities measured with these techniques are classified within Level 2 of the hierarchy and often involve using quoted market prices for similar securities, pricing models or discounted cash flow calculations using inputs observable in the market where available. Examples include U.S. government agency securities, mortgage-backed securities, obligations of states and political subdivisions, and certain corporate, asset-backed and other securities. In cases where Level 1 or Level 2 inputs are not available, as in the case of certain corporate securities, these securities are classified in Level 3 of the hierarchy.

 

Derivative instruments. The fair values of derivatives are determined based on a valuation pricing model using readily available observable market parameters such as interest rate curves, adjusted for counterparty credit risk. These measurements are classified as level 2 within the valuation hierarchy.

 

Loans Individually Evaluated. Loans individually evaluated are measured and reported at fair value when full payment under the loan terms is not probable. Loans individually evaluated are carried at the present value of expected future cash flows using the loan’s existing rate in a discounted cash flow calculation, or the fair value of the collateral if the loan is collateral-dependent. Expected cash flows are based on internal inputs reflecting expected default rates on contractual cash flows. This method of estimating fair value does not incorporate the exit-price concept of fair value described in ASC 820-10 and would generally result in a higher value than the exit-price approach. For loans measured using the estimated fair value of collateral less costs to sell, fair value is generally determined based on appraisals performed by certified and licensed appraisers using inputs such as absorption rates, capitalization rates and market comparables, adjusted for estimated costs to sell. Management modifies the appraised values, if needed, to take into account recent developments in the market or other factors, such as changes in absorption rates or market conditions from the time of valuation, and anticipated sales values considering management’s plans for disposition. Such modifications to the appraised values could result in lower valuations of such collateral. Estimated costs to sell are based on current amounts of disposal costs for similar assets. These measurements are classified as Level 3 within the valuation hierarchy. Loans individually evaluated are subject to nonrecurring fair value adjustment upon initial recognition or subsequent individually evaluation. A portion of the ACL is allocated to loans individually evaluated if the value of such loans is deemed to be less than the unpaid balance. The range of fair value adjustments and weighted average adjustment as of March 31, 2025 was 0% to 70% and 26.4%, respectively. The range of fair value adjustments and weighted average adjustment as of December 31, 2024 was 0% to 75% and 25.5% respectively. Loans individually evaluated are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly based on the same factors identified above. The amount recognized to write-down individually evaluated loans that are measured at fair value on a nonrecurring basis was $2.4 million during the three months ended March 31, 2025, and $1.1 million during the three months ended March 31, 2024.

 

Other Real Estate Owned. Other real estate assets (“OREO”) acquired through, or in lieu of, foreclosure are held for sale and are initially recorded at the lower of cost or fair value, less selling costs. Any write-downs to fair value at the time of transfer to OREO are charged to the ACL subsequent to foreclosure. Values are derived from appraisals of underlying collateral and discounted cash flow analysis. Appraisals are performed by certified and licensed appraisers. Subsequent to foreclosure, valuations are updated periodically and assets are marked to current fair value, not to exceed the new cost basis. In the determination of fair value subsequent to foreclosure, management also considers other factors or recent developments, such as changes in absorption rates and market conditions from the time of valuation, and anticipated sales values considering management’s plans for disposition, which could result in adjustment to lower the property value estimates indicated in the appraisals. The range of fair value adjustments and weighted average adjustment as of March 31, 2025 was 20% to 47% and 25%, respectively. The range of fair value adjustments and weighted average adjustment as of December 31, 2024 was 19% to 47% and 22.7%, respectively. These measurements are classified as Level 3 within the valuation hierarchy. Net gain on the sale and write-downs of OREO of $318,000 during the three months ended March 31, 2025, compared to net gain of $95,000 during the three months ended March 31, 2024. These charges were for write-downs in the value of OREO subsequent to foreclosure and losses on the disposal of OREO. OREO is classified within Level 3 of the hierarchy.

 

There were two residential real estate loans with an aggregate balance of $201,400 foreclosed and classified as OREO as of March 31, 2025 and compared to three residential real estate loan foreclosures for $450,000 as of December 31, 2024.

 

Two residential real estate loans for $158,762 were in the process of foreclosure as of March 31, 2025. There was one residential real estate loan for $82,000 that was in the process of being foreclosed as of December 31, 2024.

 

22

 

The following table presents the Company’s financial assets carried at fair value on a recurring basis as of March 31, 2025 and December 31, 2024. There were no liabilities measured at fair value on a recurring basis as of March 31, 2025 and December 31, 2024.

 

   

Fair Value Measurements at March 31, 2025 Using

         
   

Quoted Prices in

                         
   

Active Markets

   

Significant Other

   

Significant

         
   

for Identical

   

Observable Inputs

   

Unobservable

         
   

Assets (Level 1)

   

(Level 2)

   

Inputs (Level 3)

   

Total

 

Assets Measured on a Recurring Basis:

 

(In Thousands)

 

Available for sale debt securities:

                               

U.S. Treasury securities

  $ 677,063     $ -     $ -     $ 677,063  

Mortgage-backed securities

    -       213,149       -       213,149  

State and municipal securities

    -       9,685       -       9,685  

Corporate debt

    -       303,940       -       303,940  

Total available-for-sale debt securities

    677,063       526,774       -       1,203,837  

Total assets at fair value

  $ 677,063     $ 526,774     $ -     $ 1,203,837  

 

   

Fair Value Measurements at December 31, 2024 Using

         
   

Quoted Prices in

                         
   

Active Markets

   

Significant Other

   

Significant

         
   

for Identical

   

Observable Inputs

   

Unobservable

         
   

Assets (Level 1)

   

(Level 2)

   

Inputs (Level 3)

   

Total

 

Assets Measured on a Recurring Basis:

 

(In Thousands)

 

Available for sale debt securities:

                               

U.S. Treasury securities

  $ 617,486     $ -     $ -     $ 617,486  

Mortgage-backed securities

    -       219,274       -       219,274  

State and municipal securities

    -       9,517       -       9,517  

Corporate debt

    -       315,123       -       315,123  

Total available-for-sale debt securities

    617,486       543,914       -       1,161,400  

Total assets at fair value

  $ 617,486     $ 543,914     $ -     $ 1,161,400  

 

The following table presents the Company’s financial assets carried at fair value on a nonrecurring basis as of March 31, 2025 and December 31, 2024. There were no liabilities measured at fair value on a nonrecurring basis as of March 31, 2025 and December 31, 2024.

 

   

Fair Value Measurements at March 31, 2025 Using

         
   

Quoted Prices in

                         
   

Active Markets

   

Significant Other

   

Significant

         
   

for Identical

   

Observable

   

Unobservable

         
   

Assets (Level 1)

   

Inputs (Level 2)

   

Inputs (Level 3)

   

Total

 

Assets Measured on a Nonrecurring Basis:

 

(In Thousands)

 

Loans individually evaluated

  $ -     $ -     $ 91,276     $ 91,276  

Other real estate owned and repossessed assets

    -       -       756       756  

Total assets at fair value

  $ -     $ -     $ 92,032     $ 92,032  

 

   

Fair Value Measurements at December 31, 2024 Using

         
   

Quoted Prices in

                         
   

Active Markets

   

Significant Other

   

Significant

         
   

for Identical

   

Observable

   

Unobservable

         
   

Assets (Level 1)

   

Inputs (Level 2)

   

Inputs (Level 3)

   

Total

 

Assets Measured on a Nonrecurring Basis:

 

(In Thousands)

 

Loans individually evaluated

  $ -     $ -     $ 95,667     $ 95,667  

Other real estate owned and repossessed assets

    -       -       2,531       2,531  

Total assets at fair value

  $ -     $ -     $ 98,198     $ 98,198  

 

There were no liabilities measured at fair value on a non-recurring basis as of March 31, 2025 and December 31, 2024.

 

23

 

In the case of the debt securities portfolio, the Company monitors the portfolio to ascertain when transfers between levels have been affected. The nature of the remaining assets and liabilities is such that transfers in and out of any level are expected to be rare. For the three months ended March 31, 2025, there were no transfers out of Level 3 into Level 2.

 

The table below includes a roll forward of the balance sheet amounts for the three months ended March 31, 2025 and March 31, 2024 (including the change in fair value) for financial instruments classified by the Company within Level 3 of the valuation hierarchy measured at fair value on a recurring basis including changes in fair value due in part to observable factors that are part of the valuation methodology:

 

   

For the period ended March 31,

 
   

2025

   

2024

 
   

Available-for-sale Securities

   

Available-for-sale Securities

 
   

(In Thousands)

 

Fair value, beginning of period

  $ -     $ 6,860  

Transfers into Level 3

    -       -  

Total realized gains included in income

    -       -  

Changes in unrealized gains/losses included in other comprehensive income for assets and liabilities still held at period-end

    -       (1,329 )

Purchases

    -       -  

Transfers out of Level 3

    -       (5,531 )

Fair value, end of period

  $ -     $ -  

 

The fair value of a financial instrument is the current amount that would be exchanged in a sale between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. Current U.S. GAAP excludes certain financial instruments and all nonfinancial instruments from its fair value disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.

 

The estimated fair values of the Company’s financial instruments not measured at fair value on a recurring or non-recurring basis as of March 31, 2025 and December 31, 2024 were as follows:

 

March 31, 2025

 

Carrying / Notional Amount

   

Estimated Fair Value

   

Quoted Market Prices in an Active Market (Level 1)

   

Models with Significant Observable Market Parameters (Level 2)

   

Models with Significant Unobservable Market Parameters (Level 3)

 
   

(In Thousands)

 

Financial Assets:

                                       

Cash and cash equivalents

  $ 3,340,398     $ 3,340,398     $ 3,340,398     $ -     $ -  

Held to maturity U.S. Treasury securities

    249,457       233,692       233,692       -       -  

Federal funds sold

    9,322       9,322       -       9,322       -  

Held to maturity debt securities

    452,006       405,513       -       405,513       -  

Mortgage loans held for sale

    11,386       11,386       -       11,386       -  

Restricted equity securities

    12,156       12,156       -       12,156       -  

Held to maturity debt securities

    250       250       -       -       250  

Loans, net

    12,721,797       12,415,164       -       -       12,415,164  

Financial Liabilities:

                                       

Deposits

  $ 14,429,061     $ 14,427,026     $ -     $ 14,427,026     $ -  

Federal funds purchased

    2,358,326       2,358,326       -       2,358,326       -  

Other borrowings

    64,745       59,398       -       59,398       -  

 

24

 

December 31, 2024

 

Carrying / Notional Amount

   

Estimated Fair Value

   

Quoted Market Prices in an Active Market (Level 1)

   

Models with Significant Observable Market Parameters (Level 2)

   

Models with Significant Unobservable Market Parameters (Level 3)

 
   

(In Thousands)

 

Financial Assets:

                                       

Cash and cash equivalents

  $ 2,375,589     $ 2,375,589     $ 2,375,589     $ -     $ -  

Held to maturity U.S. Treasury securities

    249,403       229,771       229,771       -       -  

Federal funds sold

    1,045       1,045       -       1,045       -  

Held to maturity debt securities

    465,200       409,475       -       409,475       -  

Mortgage loans held for sale

    9,211       9,211       -       9,211       -  

Restricted equity securities

    11,300       11,300       -       11,300       -  

Held to maturity debt securities

    250       250       -       -       250  

Loans, net

    12,441,378       12,013,721       -       -       12,013,721  

Financial Liabilities:

                                       

Deposits

  $ 13,543,459     $ 13,540,438     $ -     $ 13,540,438     $ -  

Federal funds purchased

    1,993,728       1,993,728       -       1,993,728       -  

Other borrowings

    64,743       59,130       -       59,130       -  

 

 

NOTE 13 - SEGMENT REPORTING

 

The Bank’s revenue is primarily derived from the business of banking. The Bank’s financial performance is monitored on consolidated basis by senior management, which is considered to be the Bank’s CODM. Senior Management includes the following officers of the Company: Chairman of the Board and Chief Executive Officer; President; Executive Vice President, Chief Financial Officer; Executive Vice President, Chief Operating Officer. Financial performance is reported to the CODM monthly, and the primary measure of performance is net income, net interest income, non-interest income, and key operating expenses. The allocation of resources throughout the Bank is based on consolidated profitability and efficiency metrics. The presentation of financial performance to the CODM is consistent with amounts and financial statement line items shown in the Bank’s consolidated balance sheets and consolidated statements of income. Additionally, the Bank’s significant expenses are adequately segmented by category and amount in the consolidated statements of income to include all significant items when considering both qualitative and quantitative factors. Significant expenses of the Company include salaries and employee benefits, equipment and occupancy expense, third-party processing and other services, and professional services.

 

All of the Bank’s financial results are similar and considered by management to be aggregated into one reportable operating segment. While the Company has assigned certain management responsibilities by region and business line, the Bank’s CODM evaluates financial performance on a Bank-wide basis. The majority of the Bank’s revenue is from the business of banking, and the Bank’s regions have similar economic characteristics, products, services and customers. Accordingly, all of the Bank’s operations are considered by management to be aggregated in one reportable operating segment.

 

Because we report on a single segment basis, our financial statements may not be directly comparable to financial institutions that present multiple reportable segments. Should future organizational changes in our management structure or business model necessitate more detailed segment disclosures, we will revise our segment reporting accordingly. As of the date of these consolidated financial statements, no such changes have occurred, and management continues to evaluate performance on a consolidated entity basis.

 

 

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion and analysis is designed to provide a better understanding of various factors relating to the results of operations and financial condition of ServisFirst Bancshares, Inc. (the “Company”) and its wholly owned subsidiary, ServisFirst Bank (the “Bank”). This discussion is intended to supplement and highlight information contained in the accompanying unaudited consolidated balance sheets as of March 31, 2025 and December 31, 2024 and consolidated statements of income for the three months ended March 31, 2025 and March 31, 2024.

 

Forward-Looking Statements

 

Statements in this document that are not historical facts, including, but not limited to, statements concerning future operations, results or performance, are hereby identified as “forward-looking statements” for the purpose of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 27A of the Securities Act of 1933. The words “believe,” “expect,” “anticipate,” “project,” “plan,” “intend,” “will,” “could,” “would,” “might” and similar expressions often signify forward-looking statements. Such statements involve inherent risks and uncertainties. The Company cautions that such forward-looking statements, wherever they occur in this quarterly report or in other statements attributable to the Company, are necessarily estimates reflecting the judgment of the Company’s senior management and involve risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Such forward looking statements should, therefore, be considered in light of various factors that could affect the accuracy of such forward-looking statements, including, but not limited to: general economic conditions, especially in the credit markets and in the Southeast; the impact of tariffs and trade wars on general economic conditions, the performance of the capital markets; changes in interest rates, yield curves and interest rate spread relationships; changes in accounting and tax principles, policies or guidelines; changes in legislation or regulatory requirements; changes as a result of our reclassification as a large financial institution by the FDIC; changes in our loan portfolio and the deposit base; possible changes in laws and regulations and governmental monetary and fiscal policies, including, but not limited to, Federal Reserve policies in connection with continued inflationary pressures and the ability of the U.S. Congress to increase the U.S. statutory debt limit as needed; computer hacking or cyber-attacks resulting in unauthorized access to confidential or proprietary information; substantial, unexpected or prolonged changes in the level or cost of liquidity; the cost and other effects of legal and administrative cases and similar contingencies; possible changes in the creditworthiness of customers and the possible impairment of the collectability of loans and the value of collateral; the effect of natural disasters, such as hurricanes and tornados, in our geographic markets; and increased competition from both banks and nonbank financial institutions. The foregoing list of factors is not exhaustive. For discussion of these and other risks that may cause actual results to differ from expectations, please refer to “Cautionary Note Regarding Forward Looking Statements” and “Risk Factors” in our most recent Annual Report on Form 10-K and our other SEC filings. If one or more of the factors affecting our forward-looking information and statements proves incorrect, then our actual results, performance or achievements could differ materially from those expressed in, or implied by, forward-looking information and statements. Accordingly, you should not place undue reliance on any forward-looking statements, which speak only as of the date made. The Company assumes no obligation to update or revise any forward-looking statements that are made from time to time.

 

25

 

Business

 

We are a bank holding company under the Bank Holding Company Act of 1956 and are headquartered in Birmingham, Alabama. Our wholly-owned subsidiary, ServisFirst Bank, an Alabama banking corporation, provides commercial banking services through full-service banking offices located in Alabama, Florida, Georgia, North and South Carolina, Tennessee, and Virginia. We also operate a loan production office in Florida. Through the Bank, we originate commercial, consumer and other loans and accept deposits, provide electronic banking services, such as online and mobile banking, including remote deposit capture, deliver treasury and cash management services and provide correspondent banking services to other financial institutions.

 

Our principal business is to accept deposits from the public and to make loans and other investments. Our principal sources of funds for loans and investments are demand, time, savings, and other deposits. Our principal sources of income are interest and fees collected on loans, interest and dividends collected on other investments and service charges. Our principal expenses are interest paid on savings and other deposits, interest paid on our other borrowings, employee compensation, office expenses and other overhead expenses.

 

First quarter highlights

 

Diluted earnings per common share of $1.16 for the first quarter, up 26.1% from the first quarter of 2024.

Deposits grew by $886 million, or 26% annualized, during the quarter.

Loans grew by $281 million, or 9% annualized, during the quarter.

Book value per share of $30.57, up 12.9% from the first quarter of 2024 and 12.9% annualized, from the fourth quarter of 2024.

Liquidity remains very strong with $3.3 billion in cash on hand, 18% of our total assets, and no FHLB advances or brokered deposits.

Consolidated common equity tier 1 capital to risk-weighted assets increased from 11.07% to 11.48% year-over-year.

Return on average common stockholder’s equity increased from 13.82% to 15.63% year-over-year.

 

Overview

 

As of March 31, 2025, we had consolidated total assets of $18.64 billion, an increase of $1.29 billion, or 7.4%, from $17.35 billion at December 31, 2024. Total loans were $12.89 billion, an increase of $281.0 million, or 2.2%, from $12.61 billion at December 31, 2024. Total deposits were $14.43 billion, an increase of $885.6 million, or 6.5%, from $13.54 billion at December 31, 2024.

 

Net income and net income available to common stockholders of $63.2 million for the quarter ended March 31, 2025, compared to net income and net income available to common stockholders of $50.0 million for the first quarter of 2024. Basic and diluted earnings per common share were both $1.16 for the three months ended March 31, 2025 compared to $0.92 for both in the corresponding period in 2024. Changes in income and expenses are more fully explained in “Results of Operations” below. 

 

26

 

Performance Ratios

 

The following table presents selected ratios of our results of operations for the three months ended March 31, 2025, and 2024.

 

   

Three Months Ended March 31,

 
   

2025

   

2024

 

Return on average assets

    1.45 %     1.26 %

Return on average stockholders' equity

    15.63 %     13.82 %

Dividend payout ratio

    29.39 %     32.74 %

Net interest margin (1)

    2.92 %     2.66 %

Efficiency ratio (2)

    34.97 %     43.30 %

Average stockholders' equity to average total assets

    9.27 %     9.12 %

 

(1) Net interest margin is the net yield on interest earning assets and is the difference between the interest yield earned on interest-earning assets and interest rate paid on interest-bearing liabilities, divided by average earning assets.

(2) Efficiency ratio is the result of noninterest expense divided by the sum of net interest income and noninterest income.

 

Financial Condition

 

Cash and Cash Equivalents

 

At March 31, 2025, we had $9.3 million in federal funds sold, compared to $1.0 million at December 31, 2024. We also maintain balances at the Federal Reserve Bank of Atlanta, which earn interest. At March 31, 2025, we had $3.20 billion in balances at the Federal Reserve, compared to $2.25 billion at December 31, 2024.

 

Investment Securities

 

Debt securities available-for-sale totaled $1.20 billion at March 31, 2025 and $1.16 billion at December 31, 2024. Debt securities held to maturity totaled $701.7 million at March 31, 2025 and $714.9 million at December 31, 2024. We had paydowns of $23.3 million on mortgage-backed securities, calls of $19.6 million on corporate debt, and maturities of $52.4 million on U.S. Treasury securities, mortgage-backed securities, State and municipal securities, and corporate debt during the three months ended March 31, 2025. We purchased $5.5 million in corporate debt, and $109.4 million in U.S. Treasury securities during the first three months of 2025. For a tabular presentation of debt securities available for sale and held to maturity at March 31, 2025 and December 31, 2024, see “Note 4 – Securities” in our Notes to Consolidated Financial Statements.

 

The objective of our investment policy is to invest funds not otherwise needed to meet our loan demand to earn the maximum return, yet still maintain sufficient liquidity to meet fluctuations in our loan demand and deposit structure. In doing so, we seek to balance the market and credit risks against the potential investment return, make investments compatible with the pledge requirements of any deposits of public funds, maintain compliance with regulatory investment requirements, and assist certain public entities with their financial needs. The investment committee has full authority over the investment portfolio and makes decisions on purchases and sales of securities. The entire portfolio, along with all investment transactions occurring since the previous board of directors meeting, is reviewed by the board at each monthly meeting. The investment policy allows portfolio holdings to include short-term securities purchased to provide us with needed liquidity and longer-term securities purchased to generate level income for us over periods of interest rate fluctuations.

 

All investment securities in an unrealized loss position as of March 31, 2025 continue to perform as scheduled. We have evaluated the securities and have determined that the decline in fair value, relative to its amortized cost, is not due to credit-related factors. In addition, we have the ability to hold these securities within the portfolio until maturity or until the value recovers, and we believe that it is not likely that we will be required to sell these securities prior to recovery. We continue to monitor all of our securities with a high degree of scrutiny. There can be no assurance that we will not conclude in future periods that conditions existing at that time indicate some or all of its securities may be sold or would require a charge to earnings as a provision for credit losses in such periods.

 

The Company does not invest in collateralized debt obligations (“CDOs”). As of March 31, 2025, we had $303.9 million of bank holding company subordinated notes. If rated, all such bonds were rated BBB or better by Kroll Bond Rating Agency at the time of our initial investment. All other corporate bonds had a Standard and Poor’s or Moody’s rating of A-1 or better when purchased. The total investment portfolio has a combined average credit rating of AA as of March 31, 2025.

 

The carrying value of investment securities pledged to secure public funds on deposit and for other purposes as required by law was $1.58 billion and $1.43 billion as of March 31, 2025 and December 31, 2024, respectively.

 

27

 

Loans

 

We had total loans of $12.89 billion at March 31, 2025, an increase of $281.0 million, or 2.2% from $12.61 billion at December 31, 2024. Real estate – mortgage loans increased $124.6 million and Real estate – construction loans increased $110.1 million during the quarter, making up 44% and 39% respectively of total loan growth. Our loan pipeline has expanded and indicates that loan demand is improving in our market areas.

 

The following table details our loan portfolio and the percentage composition by type at March 31, 2025 and 2024:

 

   

March 31, 2025

   

March 31, 2024

 
   

(Dollars in Thousands)

 

Commercial, financial and agricultural

  $ 2,924,533     $ 2,834,102  

Real estate - construction

    1,599,410       1,546,716  

Real estate - mortgage:

               

Owner-occupied commercial

    2,543,819       2,377,042  

1-4 family mortgage

    1,494,189       1,284,888  

Non-owner occupied commercial

    4,259,566       3,777,758  

Total real estate - mortgage

    8,297,574       7,439,688  

Consumer

    65,314       60,190  

Total Loans

    12,886,831       11,880,696  

Less: Allowance for credit losses

    (165,034 )     (164,458 )

Net Loans

  $ 12,721,797     $ 11,716,238  
                 

Commercial, financial and agricultural

    22.69 %     23.85 %

Real estate - construction

    12.41       13.02  

Real estate - mortgage:

               

Owner-occupied commercial

    19.74       20.01  

1-4 family mortgage

    11.60       10.81  

Non-owner occupied commercial

    33.05       31.80  

Total real estate - mortgage

    64.39       62.62  

Consumer

    0.51       0.51  

Total Loans

    100.00 %     100.00 %

 

The table below summarizes the Company’s commercial real estate portfolio at March 31, 2025 as segregated by industry concentrations based on North American Industry Classification System:

 

   

2025

 
   

Balance

   

Percent of Total

 
   

(Dollars in Thousands)

 

Owner Occupied Real Estate

               

Retail Trade

  $ 531,658       7.8 %

Other Services (except Public Administration)

    335,840       4.9  

Health Care and Social Assistance

    282,198       4.1  

Accommodation and Food Services

    197,363       2.9  

Manufacturing

    182,603       2.7  

Professional, Scientific, and Technical Services

    170,172       2.5  

Real Estate and Rental and Leasing

    156,869       2.3  

Wholesale Trade

    135,804       2.0  

All Other Owner Occupied Real Estate

    551,312       8.1  

Total Owner Occupied Real Estate

  $ 2,543,819       37.4 %
                 

Non-Owner Occupied Real Estate

               

Multifamily Permanent

  $ 1,252,162       18.4 %

Shopping or Retail Center

    603,342       8.9  

Hotel or Motel

    638,279       9.4  

Office Building

    438,453       6.4  

Nursing Home or Assisted Living Facility

    341,628       5.0  

Office Warehouse

    216,268       3.2  

Warehouse

    97,399       1.4  

Self-Storage Facility

    130,696       1.9  

Gas Station or Convenience Store

    104,822       1.5  

Restaurant

    66,735       1.0  

All Other Income Property

    369,782       5.4  

Total Non-Owner Occupied Real Estate

  $ 4,259,566       62.6 %

Total Commercial Real Estate

  $ 6,803,385       100.0 %

 

28

 

The table below summarizes the Company’s commercial real estate portfolio at March 31, 2025 as segregated by geographic region in which the property is located:

 

   

2025

 
   

Balance

   

Percent of Total

 
   

(Dollars in Thousands)

 

State:

               

Alabama

  $ 2,132,941       31.4 %

Florida

    1,796,570       26.4  

Georgia

    798,924       11.7  

North Carolina

    195,896       2.9  

South Carolina

    340,420       5.0  

Tennessee

    621,747       9.1  

Virginia

    82,488       1.2  

Other

    834,399       12.3  

Total commercial real estate loans

  $ 6,803,385       100.0 %

 

Asset Quality

 

The Company assesses the adequacy of its ACL at the end of each calendar quarter. The level of ACL is based on the Company’s evaluation of historical default and loss experience, current and projected economic conditions, asset quality trends, known and inherent risks in the portfolio, adverse situations that may affect the borrowers’ ability to repay a loan, the estimated value of any underlying collateral, composition of the loan portfolio and other relevant factors. The ACL is increased by a provision for credit losses, which is charged to expense, and reduced by charge-offs, net of recoveries. We believe the ACL is adequate to absorb all expected future losses to be recognized over the contractual life of the loans in the portfolio.

 

Loans with similar risk characteristics are evaluated in pools and, depending on the nature of each identified pool, the Company utilizes a discounted cash flow (“DCF”), probability of default / loss given default (“PD/LGD”) or remaining life method. The historical loss experience estimate by pool is then adjusted by forecast factors that are quantitatively related to the Company’s historical credit loss experience, such as national unemployment rates and gross domestic product. Losses are predicted over a period of time determined to be reasonable and supportable, and at the end of the reasonable and supportable period losses are reverted to long term historical averages. The reasonable and supportable period and reversion period are re-evaluated each quarter by the Company and are dependent on the current economic environment among other factors. See “Note 1 – General” in the Notes to Consolidated Financial Statements included in Item 1. Consolidated Financial Statements elsewhere in this report.

 

The expected credit losses for each loan pool are then adjusted for changes in qualitative factors not inherently considered in the quantitative analyses. The qualitative adjustments either increase or decrease the quantitative model estimation. The Company considers factors that are relevant within the qualitative framework, which include the following: lending policy, changes in nature and volume of loans, staff experience, changes in volume and trends of problem loans, concentration risk, trends in underlying collateral values, external factors, quality of loan review system and other economic conditions.

 

Loans that no longer share similar risk characteristics with the collectively evaluated pools are excluded from the collective evaluation and expected credit losses are estimated on an individual basis. Individual evaluations are performed for nonaccrual loans, loans rated substandard, and certain modified loans. The allowance for credit losses on these individually evaluated loans is calculated using methods such as the estimated fair value of underlying collateral, observable market prices of comparable debt, or the present value of expected future cash flows.

 

29

 

   

As of and for the Three Months Ended

 
   

March 31,

 
   

2025

   

2024

 
   

(Dollars in thousands)

 

Total loans outstanding, net of unearned income

  $ 12,886,831     $ 11,880,696  

Average loans outstanding, net of unearned income

  $ 12,708,121     $ 11,740,996  

Allowance for credit losses at beginning of period

    164,458       153,317  

Charge-offs:

               

Commercial, financial and agricultural loans

    2,415       1,842  

Real estate - construction

    46       -  

Real estate - mortgage

    3,571       67  

Consumer loans

    60       98  

Total charge-offs

    6,092       2,007  

Recoveries:

               

Commercial, financial and agricultural loans

    171       199  

Real estate - construction

    -       -  

Real estate - mortgage

    -       6  

Consumer loans

    27       9  

Total recoveries

    198       214  

Net charge-offs

    5,894       1,793  

Provision for credit losses on loans

    6,470       4,368  

Allowance for credit losses on loans at period end

  $ 165,034     $ 155,892  

Allowance for credit losses on loans to period end loans

    1.28 %     1.31 %

Net charge-offs to average loans

    0.19 %     0.06 %

 

           

Percentage

 
           

of loans in

 
           

each

 
           

category to

 

March 31, 2025

 

Amount

   

total loans

 
   

(In Thousands)

 

Commercial, financial and agricultural

  $ 52,518       22.69 %

Real estate - construction

    41,809       12.41 %

Owner-occupied commercial

    21,330       19.74 %

1-4 family mortgage

    15,246       11.59 %

Non-owner occupied commercial

    31,853       33.06 %

Consumer

    2,278       0.51 %

Total

  $ 165,034       100.00 %

 

           

Percentage

 
           

of loans in

 
           

each

 
           

category to

 

December 31, 2024

 

Amount

   

total loans

 
   

(In Thousands)

 

Commercial, financial and agricultural

  $ 55,330       22.77 %

Real estate - construction

    38,597       11.81 %

Owner-occupied commercial

    22,302       20.21 %

1-4 family mortgage

    14,096       11.46 %

Non-owner occupied commercial

    31,328       33.17 %

Consumer

    2,805       0.58 %

Total

  $ 164,458       100.00 %

 

Nonperforming Assets

 

Total nonperforming loans at March 31, 2025, which include nonaccrual loans and loans 90 or more days past due and still accruing, increased $31.4 million, or 74.0%, to $73.9 million from $42.5 million at December 31, 2024. Of this total, nonaccrual loans of $73.8 million at March 31, 2025 represented a net increase of $34.3 million from nonaccrual loans at December 31, 2024. The majority of the year-over-year increase in non-performing assets is attributable to two relationships, both of which are secured by real estate. Excluding credit card accounts, there were no loans 90 or more days past due and still accruing at March 31, 2025, compared to seven loans totaling $2.2 million at December 31, 2024. Loans made to borrowers experiencing financial difficulty that were modified during the three months ended March 31, 2025 and 2024 were $11.1 million and $18.4 million, respectively.

 

30

 

OREO and repossessed assets at March 31, 2025 were $756,000, a decrease of $1.8 million, or 70.1%, from $2.5 million at December 31, 2024. The following table summarizes OREO and repossessed asset activity for the three months ended March 31, 2025 and 2024:

 

   

Three months ended March 31,

 
   

2025

   

2024

 
   

(In thousands)

 

Balance at beginning of period

  $ 2,531     $ 995  

Transfers from loans and capitalized expenses

    24       90  

Proceeds from sales

    (2,117 )     (690 )

Write-downs / net gain (loss) on sales

    318       95  

Balance at end of period

  $ 756     $ 490  

 

The following table summarizes our nonperforming assets at March 31, 2025 and December 31, 2024:

 

   

March 31, 2025

   

December 31, 2024

 
           

Number of

           

Number of

 
   

Balance

   

Loans

   

Balance

   

Loans

 
   

(Dollar Amounts In Thousands)

 

Nonaccrual loans:

                               

Commercial, financial and agricultural

  $ 36,841       59     $ 25,692       54  

Real estate - construction

    7,486       5       -       -  

Real estate - mortgage:

                               

Owner-occupied commercial

    16,467       19       8,744       14  

1-4 family mortgage

    5,466       33       3,051       24  

Non-owner occupied commercial

    6,792       4       1,259       2  

Total real estate - mortgage

    28,725       56       13,054       40  

Consumer

    741       1       755       1  

Total Nonaccrual loans:

  $ 73,793       121     $ 39,501       95  
                                 

90+ days past due and accruing:

                               

Commercial, financial and agricultural

  $ 45       -     $ 38       4  

Real estate - construction

    -       -       661       2  

Real estate - mortgage:

                               

Owner-occupied commercial

    -       -       -       -  

1-4 family mortgage

    -       -       2,240       7  

Non-owner occupied commercial

    -       -       -       -  

Total real estate - mortgage

    -       -       2,240       7  

Consumer

    66       24       26       21  

Total 90+ days past due and accruing:

  $ 111       24     $ 2,965       34  
                                 

Total Nonperforming Loans:

  $ 73,904       145     $ 42,466       129  
                                 

Plus: Other real estate owned and repossessions

    756       6       2,531       8  

Total Nonperforming Assets

  $ 74,660       151     $ 44,997       137  
                                 

Ratios:

                               

Nonperforming loans to total loans

    0.57 %             0.34 %        

Nonperforming assets to total loans plus other real estate owned and repossessions

    0.58 %             0.36 %        

Nonperforming assets plus restructured accruing loans to total loans plus other real estate owned and repossessions

    0.58 %             0.36 %        

 

The balance of nonperforming assets can fluctuate due to changes in economic conditions. We have established a policy to discontinue accruing interest on a loan (i.e., place the loan on nonaccrual status) after it has become 90 days delinquent as to payment of principal or interest, unless the loan is considered to be well-collateralized and is actively in the process of collection. In addition, a loan will be placed on nonaccrual status before it becomes 90 days delinquent if management believes that the collection of interest is not expected. Interest previously accrued but uncollected on such loans is reversed and charged against current income when the receivable is determined to be uncollectible. Interest income on nonaccrual loans is recognized only as received. If we believe that a loan will not be collected in full, we will increase the ACL to reflect management’s estimate of any potential exposure or loss. Generally, payments received on nonaccrual loans are applied directly to principal.

 

31

 

Deposits

 

We rely on increasing our deposit base to fund loan and other asset growth. Each of our markets is highly competitive. We compete for local deposits by offering attractive products with competitive rates. We expect to have a higher average cost of funds for local deposits than competitor banks due to our lack of an extensive branch network. Our management’s strategy is to offset the higher cost of funding with a lower level of operating expense and firm pricing discipline for loan products. We have promoted electronic banking services by providing them without charge and by offering in-bank customer training. Our total deposits at March 31, 2025 were $14.43 billion, an increase of $885.6 million, or 6.5%, from $13.54 billion at December 31, 2024. The increase in total deposits is primarily due to organic growth across nine of our eleven markets, with most of that increase attributable to money market products.

 

For amounts and rates of our deposits by category, see the table “Average Consolidated Balance Sheets and Net Interest Analysis on a Fully Taxable-equivalent Basis” under the subheading “Net Interest Income” below.

 

The following table summarizes balances of our deposits and the percentage of each type to the total at March 31, 2025 and December 31, 2024.

 

   

March 31, 2025

   

December 31, 2024

 

Noninterest-bearing demand

  $ 2,647,577       18.35 %   $ 2,619,687       19.34 %

Interest-bearing demand

    2,472,854       17.14 %     2,753,210       20.33 %

Money market

    7,844,305       54.36 %     6,757,951       49.90 %

Savings

    102,593       0.71 %     102,088       0.75 %

Time deposits, $250,000 and under

    371,693       2.58 %     367,216       2.71 %

Time deposits, over $250,000

    990,039       6.86 %     943,307       6.97 %
    $ 14,429,061       100.00 %   $ 13,543,459       100.00 %

 

At March 31, 2025, and December 31, 2024, we estimate that we had approximately $9.81 billion and $9.03 billion, respectively, in uninsured deposits. The uninsured deposit data for 2025 and 2024 reflects the deposit insurance impact of “combined ownership segregation” of escrow and other accounts at an aggregate level but does not reflect an evaluation of all of the account styling distinctions that would determine the availability of deposit insurance to individual accounts based on FDIC regulations.

 

The following table presents the portion of our time deposits in excess of insurance limit as of March 31, 2025.

 

 

   

Portion of Time Deposits in Excess of Insurance Limit

 
   

March 31, 2025

 

Time Deposits Otherwise Uninsured With a Maturity of:

 

(In Thousands)

 
         

3 months or less

  $ 166,494  

Over 3 months through 6 months

    110,553  

Over 6 months through 12 months

    72,247  

Over 12 months

    48,796  

Total

  $ 398,090  

 

Borrowings

 

Our borrowings consist of federal funds purchased and subordinated notes payable. We had $2.36 billion and $1.99 billion at March 31, 2025 and December 31, 2024, respectively, in federal funds purchased from correspondent banks that are clients of our correspondent banking unit. The average rate paid on these borrowings was 4.51% for the quarter ended March 31, 2025. Other borrowings consist of the following:

 

 

$30.0 million of the Company’s 4.5% Subordinated Notes due November 8, 2027, which were issued in a private placement in November 2017 and pay interest semi-annually. The Notes may be prepaid by the Company; and

 

 

$34.75 million of the Company’s 4% Subordinated Notes due October 21, 2030, which were issued in a private placement in October 2020 and pay interest semi-annually. The Notes may not be prepaid by the Company prior to October 21, 2025.

 

32

 

Liquidity

 

Liquidity is defined as our ability to generate sufficient cash to fund current loan demand, deposit withdrawals, and other cash demands and disbursement needs, and otherwise to operate on an ongoing basis.

 

The retention of existing deposits and attraction of new deposit sources through new and existing customers is critical to our liquidity position. If our liquidity was to decline due to a run-off in deposits, we have procedures that provide for certain actions under varying liquidity conditions. These actions include borrowing from existing correspondent banks, selling or participating loans, and curtailing loan commitments and funding. At March 31, 2025, our liquid assets, represented by cash and due from banks, federal funds sold and unpledged available-for-sale securities, totaled $3.68 billion. The Bank had loans pledged to both the FHLB and the Federal Reserve Bank of Atlanta, which provided approximately $3.08 billion and $2.20 billion, respectively, in available funding. The Bank’s policy limits on brokered deposits would allow for up to $4.66 billion in available funding for brokered deposits. Additionally, the Bank had approximately $312.0 million in available unused federal funds lines of credit with regional banks, subject to certain restrictions and collateral requirements, to meet short term funding needs.

 

Our management meets on a quarterly basis to review sources and uses of funding to determine the appropriate strategy to ensure an appropriate level of liquidity. At the current time, our long-term liquidity needs primarily relate to funds required to support loan originations and commitments and deposit withdrawals. Our regular sources of funding are from the growth of our deposit base, repayment of principal and interest on loans, the sale of loans and the renewal of time deposits. In addition, we have issued debt as described above under “Borrowings” and have various other sources of liquidity as discussed herein. We believe these sources of funding are adequate to meet both our immediate (within the next 12 months) and our longer term anticipated funding needs. However, we may need additional funding if we are able to maintain our current growth rate into the future.

 

We are subject to general FDIC guidelines that require a minimum level of liquidity. Management believes our liquidity ratios meet or exceed these guidelines.

 

The following table illustrates, during the periods presented, the mix of our funding sources and the assets in which those funds are invested as a percentage of our average total assets for the period indicated. Average assets totaled $17.71 billion and $15.96 billion for the quarters ended March 31, 2025 and 2024, respectively.

 

   

For the Three Months Ended March 31,

 
   

2025

   

2024

 

Sources of Funds:

               

Deposits:

               

Non-interest-bearing

    14.7 %     15.9 %

Interest-bearing

    63.6       64.8  

Federal funds purchased

    11.2       8.9  

Long term debt and other borrowings

    0.4       0.4  

Other liabilities

    0.7       0.6  

Equity capital

    9.4       9.4  

Total sources

    100.0 %     100.0 %
                 

Uses of Funds:

               

Loans

    71.9 %     73.7 %

Securities

    10.9       12.6  

Interest-bearing balances with banks

    14.3       10.6  

Federal funds sold

    -       0.2  

Other assets

    2.9       2.9  

Total uses

    100.0 %     100.0 %

 

33

 

Capital Adequacy

 

Total stockholders’ equity attributable to us at March 31, 2025 was $1.67 billion, or 8.95% of total assets. At December 31, 2024, total stockholders’ equity attributable to us was $1.62 billion, or 9.32% of total assets.

 

As of March 31, 2025, our most recent notification from the FDIC categorized us as well-capitalized under the regulatory framework for prompt corrective action. To remain categorized as well-capitalized, the Bank must maintain minimum common equity Tier 1, Tier 1 risk-based, total risk-based, and Tier 1 leverage ratios as disclosed in the table below, and not be subject to any written agreement, order, or directive from the FDIC requiring us to maintain a specific capital level for any capital measure. Our management believes that we are well-capitalized under the prompt corrective action provisions as of March 31, 2025.

 

The final rules implementing the Basel Committee on Banking Supervision's capital guidelines for U.S. banks (Basel III rules) became effective January 1, 2015, subject to a phase-in period for certain aspects of the new rules. In order to avoid restrictions on capital distributions and discretionary bonus payments to executives, under the Basel III rules a covered banking organization is required to maintain a “capital conservation buffer” in addition to its minimum risk-based capital requirements. This buffer is required to consist solely of common equity Tier 1 capital, and the buffer applies to all three risk-based measurements (CET1, Tier 1 capital and total capital). The capital conservation buffer became fully effective on January 1, 2019. As of January 1, 2019, an additional amount of common equity Tier 1 capital equal to 2.5% of risk-weighted assets is required for compliance with the capital conservation buffer. The ratios for the Company and the Bank are currently sufficient to satisfy the fully phased-in capital conservation buffer.

 

The following table sets forth (i) the capital ratios required by Basel III and prompt corrective action and (ii) our actual ratios, as of March 31, 2025, December 31, 2024 and March 31, 2024:

 

   

Actual

   

For Basel III Capital Adequacy Purposes*

   

To Be Well Capitalized Under Prompt Corrective Action Provisions

 
   

Amount

   

Ratio

   

Amount

   

Ratio

   

Amount

   

Ratio

 

As of March 31, 2025:

                                               

CET 1 Capital to Risk-Weighted Assets:

                                               

Consolidated

  $ 1,679,893       11.48 %   $ 658,657       4.50 %     N/A       N/A  

ServisFirst Bank

    1,738,783       11.88 %     658,615       4.50 %   $ 951,333       6.50 %

Tier 1 Capital to Risk-Weighted Assets:

                                               

Consolidated

    1,680,393       11.48 %     878,209       6.00 %     N/A       N/A  

ServisFirst Bank

    1,739,283       11.88 %     878,153       6.00 %     1,170,871       8.00 %

Total Capital to Risk-Weighted Assets:

                                               

Consolidated

    1,892,940       12.93 %     1,170,946       8.00 %     N/A       N/A  

ServisFirst Bank

    1,905,084       13.02 %     1,170,871       8.00 %     1,463,589       10.00 %

Tier 1 Capital to Average Assets:

                                               

Consolidated

    1,680,393       9.48 %     709,039       4.00 %     N/A       N/A  

ServisFirst Bank

    1,739,283       9.81 %     709,027       4.00 %     886,283       5.00 %
                                                 

As of December 31, 2024:

                                               

CET 1 Capital to Risk-Weighted Assets:

                                               

Consolidated

  $ 1,634,837       11.42 %   $ 644,441       4.50 %     N/A       N/A  

ServisFirst Bank

    1,694,412       11.83 %     644,402       4.50 %   $ 930,803       6.50 %

Tier 1 Capital to Risk-Weighted Assets:

                                               

Consolidated

    1,635,337       11.42 %     859,255       6.00 %     N/A       N/A  

ServisFirst Bank

    1,694,912       11.84 %     859,203       6.00 %     1,145,604       8.00 %

Total Capital to Risk-Weighted Assets:

                                               

Consolidated

    1,847,146       12.90 %     1,145,673       8.00 %     N/A       N/A  

ServisFirst Bank

    1,859,978       12.99 %     1,145,604       8.00 %     1,432,005       10.00 %

Tier 1 Capital to Average Assets:

                                               

Consolidated

    1,635,337       9.59 %     682,238       4.00 %     N/A       N/A  

ServisFirst Bank

    1,694,912       9.94 %     682,223       4.00 %     852,779       5.00 %
                                                 

As of March 31, 2024:

                                               

CET 1 Capital to Risk-Weighted Assets:

                                               

Consolidated

  $ 1,508,513       11.07 %   $ 613,067       4.50 %     N/A       N/A  

ServisFirst Bank

    1,566,428       11.50 %     613,026       4.50 %   $ 885,481       6.50 %

Tier 1 Capital to Risk-Weighted Assets:

                                               

Consolidated

    1,509,013       11.08 %     817,422       6.00 %     N/A       N/A  

ServisFirst Bank

    1,566,928       11.50 %     817,368       6.00 %     1,089,823       8.00 %

Total Capital to Risk-Weighted Assets:

                                               

Consolidated

    1,718,384       12.61 %     1,089,896       8.00 %     N/A       N/A  

ServisFirst Bank

    1,723,562       12.65 %     1,089,823       8.00 %     1,362,279       10.00 %

Tier 1 Capital to Average Assets:

                                               

Consolidated

    1,509,013       9.44 %     639,651       4.00 %     N/A       N/A  

ServisFirst Bank

    1,566,928       9.80 %     639,621       4.00 %     799,527       5.00 %

 

* this column reflects the minimum capital ratios under Basel III and does not include the 2.5% capital conservation buffer

 

34

 

We are a legal entity separate and distinct from the Bank. Our principal source of cash flow, including cash flow to pay dividends to our stockholders, is dividends the Bank pays to us as the Bank’s sole shareholder. Statutory and regulatory limitations apply to the Bank’s payment of dividends to us as well as to our payment of dividends to our stockholders. The requirement that a bank holding company must serve as a source of strength to its subsidiary banks also results in the position of the Federal Reserve that a bank holding company should not maintain a level of cash dividends to its stockholders that places undue pressure on the capital of its bank subsidiaries or that can be funded only through additional borrowings or other arrangements that may undermine the bank holding company’s ability to serve as such a source of strength. Our ability to pay dividends is also subject to the provisions of Delaware corporate law.

 

The Alabama Banking Department also regulates the Bank’s dividend payments. Under Alabama law, a state-chartered bank may not pay a dividend in excess of 90% of its net earnings until the Bank’s surplus is equal to at least 20% of its capital (our Bank’s surplus currently exceeds 20% of its capital). Moreover, our Bank is also required by Alabama law to obtain the prior approval of the Superintendent of Banks (“Superintendent”) for its payment of dividends if the total of all dividends declared by the Bank in any calendar year will exceed the total of (i) the Bank’s net earnings (as defined by statute) for that year, plus (ii) its retained net earnings for the preceding two years, less any required transfers to surplus. In addition, no dividends, withdrawals or transfers may be made from the Bank’s surplus without the prior written approval of the Superintendent.

 

The Bank’s payment of dividends may also be affected or limited by other factors, such as the requirement to maintain adequate capital above regulatory guidelines. The federal banking agencies have indicated that paying dividends that deplete a depository institution’s capital base to an inadequate level would be an unsafe and unsound banking practice. Under the Federal Deposit Insurance Corporation Improvement Act of 1991, a depository institution may not pay any dividends if payment would cause it to become undercapitalized or if it already is undercapitalized. Moreover, the federal agencies have issued policy statements that provide that bank holding companies and insured banks should generally only pay dividends out of current operating earnings. If, in the opinion of the federal banking regulators, the Bank were engaged in or about to engage in an unsafe or unsound practice, the federal banking regulators could require, after notice and a hearing, that the Bank stop or refrain from engaging in the questioned practice.

 

Off-Balance Sheet Arrangements

 

In the normal course of business, we are a party to financial credit arrangements with off-balance sheet risk to meet the financing needs of our customers.  These financial credit arrangements include commitments to extend credit beyond current fundings, credit card arrangements, standby letters of credit and financial guarantees.  Those credit arrangements involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheet.  The contract or notional amounts of those instruments reflect the extent of involvement we have in those particular financial credit arrangements. All such credit arrangements bear interest at variable rates and we have no such credit arrangements that bear interest at fixed rates.

 

Our exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit, credit card arrangements and standby letters of credit is represented by the contractual or notional amount of those instruments.  We use the same credit policies in making commitments and conditional obligations as we do for on-balance sheet instruments.

 

As part of our mortgage operations, we originate and sell certain loans to investors in the secondary market. We continue to experience a manageable level of investor repurchase demands. For loans sold, we have an obligation to either repurchase the outstanding principal balance of a loan or make the purchaser whole for the economic benefits of a loan if it is determined that the loans sold were in violation of representations and warranties made by the Bank at the time of the sale. Representations and warranties typically include those made regarding loans that had missing or insufficient file documentation or loans obtained through fraud by borrowers or other third parties such as appraisers.

 

Financial instruments whose contract amounts represent credit risk at March 31, 2025 are as follows:

 

   

March 31, 2025

 
   

(In Thousands)

 

Commitments to extend credit

  $ 3,408,210  

Credit card arrangements

    380,530  

Standby letters of credit

    120,116  
    $ 3,908,856  

 

35

 

The Company invests in certain affordable housing projects throughout its market area as a means of supporting local communities. The Company receives tax credits related to these investments, for which it typically acts as a limited partner and therefore does not exert control over the operating or financial policies of the partnerships. The Company typically provides financing during the construction and development of the properties. Tax credits are subject to recapture by taxing authorities based on compliance features required to be met at the project level. The Company’s maximum potential exposure to losses relative to investments in VIEs is generally limited to the sum of the outstanding balance, future funding commitments and any related loans to the entity, exclusive of any potential tax recapture associated with the investments. Loans to these entities are underwritten in substantially the same manner as the Company’s other loans and are generally secured. The Company invests as a limited partner in certain projects through the New Market Tax Credit program, which is a Federal financial program aimed to stimulate business and real estate investment in underserved communities via a federal tax credit. The Company has investments in and future funding commitments related to private equity and certain other equity method investments. The risk exposure relating to such commitments is generally limited to the amount of investments and future funding commitments made. The following table summarizes certain tax credit and certain equity investments.

 

 

     Balance Sheet Location    

March 31, 2025

   

December 31, 2024

 
         

(In Thousands)

 

Investments in affordable housing projects and other qualified tax credits:

                     

Carrying amount

 

Other assets

  $ 77,198     $ 75,705  

Amount of future funding commitments including in carrying amount

 

Other liabilities

    30,304       39,502  

Lending exposures

 

Loans

    60,089       77,579  

SBIC and certain other equity method investments:

                     

Carrying amount

 

Other assets

    5,822       4,642  

Amount of future funding commitments not included in carrying amount

   N/A       13,628       12,308  

 

The following table presents a summary of tax credits and amortization expense associated with those investments accounted for using the proportional amortization method for the period indicated.

 

     

March 31,

 
 

Income Statement Location

 

2025

   

2024

 
     

(In Thousands)

 

Income tax credits and other income tax benefits

Income tax expense

  $ 3,341     $ 812  

Amortization Expense

Income tax expense

    2,564       633  

 

Commitments to extend credit beyond current funded amounts are agreements to lend to a customer as long as there is no violation of any condition established in the applicable loan agreement. Such commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. We evaluate each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by us upon extension of credit is based on our management’s credit evaluation. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment, and income-producing commercial properties.

 

Standby letters of credit are conditional commitments issued by us to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing, and similar transactions. All letters of credit are due within one year or less of the original commitment date. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

 

Federal funds lines of credit are uncommitted lines issued to downstream correspondent banks for the purpose of providing liquidity to them. The lines are unsecured, and we have no obligation to sell federal funds to the correspondent, nor does the correspondent have any obligation to request or accept purchases of federal funds from us.

 

36

 

Results of Operations

 

Summary of Net Income

 

Net income and net income available to common stockholders of $63.2 million for the quarter ended March 31, 2025, compared to net income and net income available to common stockholders of $50.0 million for the first quarter of 2024. The increase in net income was primarily attributable to a $21.1 million increase in net interest income during the three months ended March 31, 2025 to $123.6 million, compared to $102.5 million during the same period in 2024.  The increase in net interest income was largely driven by higher interest income and lower interest on deposits. However, this was partially offset by $631,000, or 7.1% decrease in non-interest income, which declined to $8.3 million in the first quarter of 2025 from $8.9 million in the same quarter of 2024. This decline was primarily due to a reduction in bank owned life insurance income. Non-interest expenses remained relatively flat, decreasing by $124,000, or 0.3%, to $46.1 million year‑over‑year.

 

Basic and diluted earnings per common share were both $1.16 for the three months ended March 31, 2025, compared to $0.92 for both in the corresponding period in 2024. Return on average assets for the three months ended March 31, 2025 was 1.45% compared to 1.26% for the corresponding period in 2024, and return on average common stockholders’ equity for the three months ended March 31, 2025 was 15.63% compared to 13.82% for the corresponding period in 2024.

 

Net Interest Income

 

Net interest income is the difference between the income earned on interest-earning assets and interest paid on interest-bearing liabilities used to support such assets. The major factors that affect net interest income are changes in volumes, the yield on interest-earning assets and the cost of interest-bearing liabilities. Management’s ability to respond to changes in interest rates by effective asset-liability management techniques is critical to maintaining the stability of the net interest margin and the momentum of our primary source of earnings.

 

Taxable-equivalent net interest income increased $21.1 million, or 20.6%, to $123.6 million for the three months ended March 31, 2025 compared to $102.5 million for the corresponding period in 2024. The taxable-equivalent yield on interest-earning assets increased from 5.88% to 5.69% year-over-year. Loan yields were 6.28% during the first quarter of 2025 compared to 6.40% during the fourth quarter of 2024 and 6.40% during the first quarter of 2024. Investment yields were 3.31% during the first quarter of 2025 compared to 3.49% during the fourth quarter of 2024 and 3.16% during the first quarter of 2024. Average interest-bearing deposit rates were 3.40% during the first quarter of 2025, compared to 3.63% during the fourth quarter of 2024 and 4.04% during the first quarter of 2024. Average federal funds purchased rates were 4.50% during first quarter of 2025, compared to 4.80% during the fourth quarter of 2024 and 5.50% during the first quarter of 2024. The net interest margin in the first quarter of 2025 was 2.92% compared to 2.96% in the fourth quarter of 2024 and 2.66% in the first quarter of 2024.

 

The Federal Reserve Bank decreased their targeted federal funds rate from 5.25 – 5.50% at March 31, 2024 to its current range as of March 31, 2025 of 4.25 – 4.50%. Our cost of funding has decreased as a result of the decrease in the targeted federal funds rate.

 

The following table shows, for the three months ended March 31, 2025 and March 31, 2024, the average balances of each principal category of our assets, liabilities and stockholders’ equity, and an analysis of net interest revenue. The accompanying table reflects changes in our net interest margin as a result of changes in the volume and rate of our interest-earning assets and interest-bearing liabilities for the same periods. Changes as a result of mix or the number of days in the periods have been allocated to the volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each. Both tables are presented on a taxable-equivalent basis where applicable:

 

37

 

Average Consolidated Balance Sheets and Net Interest Analysis

On a Fully Taxable-Equivalent Basis

For the Three Months Ended March 31,

(In thousands, except Average Yields and Rates)

 

   

2025

   

2024

 
           

Interest

   

Average

           

Interest

   

Average

 
   

Average

   

Earned /

   

Yield /

   

Average

   

Earned /

   

Yield /

 
   

Balance

   

Paid

   

Rate

   

Balance

   

Paid

   

Rate

 

Assets:

                                               

Interest-earning assets:

                                               

Loans, net of unearned income (1)(2):

                                               

Taxable

  $ 12,683,077     $ 196,616       6.29 %   $ 11,723,391     $ 186,739       6.41 %

Tax-exempt (3)

    25,044       305       4.94       17,605       219       5.00  

Total loans, net of unearned income

    12,708,121       196,921       6.28       11,740,996       186,958       6.40  

Mortgage loans held for sale

    6,731       79       4.76       4,770       66       5.57  

Debt securities:

                                    -       -  

Taxable

    1,934,739       16,023       3.31       2,013,295       15,922       3.16  

Tax-exempt (3)

    589       8       5.43       1,296       11       3.40  

Total debt securities (4)

    1,935,328       16,031       3.31       2,014,591       15,933       3.16  

Federal funds sold

    1,670       20       4.86       37,298       541       5.83  

Restricted equity securities

    11,461       210       7.43       10,417       196       7.57  

Interest-bearing balances with banks

    2,526,382       27,901       4.48       1,687,977       23,007       5.48  

Total interest-earning assets

  $ 17,189,693     $ 241,162       5.69 %   $ 15,496,049     $ 226,701       5.88 %

Non-interest-earning assets:

                                               

Cash and due from banks

    108,540                       98,813                  

Net fixed assets and equipment

    59,633                       60,126                  

Allowance for credit losses, accrued interest and other assets

    352,282                       302,592                  

Total assets

  $ 17,710,148                     $ 15,957,580                  
                                                 

Liabilities and stockholders' equity:

                                               

Interest-bearing liabilities:

                                               

Interest-bearing demand deposits

  $ 2,461,900     $ 14,462       2.38 %   $ 2,339,548     $ 15,662       2.69 %

Savings deposits

    101,996       404       1.61       106,924       468       1.76  

Money market accounts

    7,363,163       65,628       3.61       6,761,495       75,273       4.48  

Time deposits

    1,361,558       14,251       4.24       1,164,204       12,663       4.37  

Total interest-bearing deposits

    11,288,617       94,745       3.40       10,372,171       104,066       4.04  

Federal funds purchased

    1,994,766       22,111       4.50       1,422,828       19,462       5.50  

Other borrowings

    64,750       687       4.30       64,736       685       4.26  

Total interest-bearing liabilities

  $ 13,348,133     $ 117,543       3.57 %   $ 11,859,735     $ 124,213       4.21 %

Non-interest-bearing liabilities:

                                               

Non-interest-bearing demand deposits

    2,600,775                       2,550,841                  

Other liabilities

    120,291                       91,066                  

Stockholders' equity

    1,670,402                       1,503,240                  

Accumulated other comprehensive loss

    (29,453 )                     (47,302 )                

Total liabilities and stockholders' equity

  $ 17,710,148                     $ 15,957,580                  

Net interest income

          $ 123,619                     $ 102,488          

Net interest spread

                    2.12 %                     1.67 %

Net interest margin

                    2.92 %                     2.66 %

 

(1) Non-accrual loans are included in average loan balances in all periods. Loan fees of $3,764 and $3,655 are included in interest income in the first quarter of 2025 and 2024, respectively.

(2) Amortization of acquired loan premiums of $51 and $49 is included in interest income in 2025 and 2024, respectively.

(3) Interest income and yields are presented on a fully taxable equivalent basis using a tax rate of 21%.

(4) Unrealized losses of $(41,970) and $(68,162) are excluded from the yield calculation in the first quarter of 2025 and 2024, respectively.

 

38

 

   

For the Three Months Ended March 31,

 
   

2025 Compared to 2024 Increase (Decrease) in Interest Income and Expense Due to Changes in:

 
   

Volume

   

Rate

   

Total

 
   

(In Thousands)

 

Interest-earning assets:

                       

Loans, net of unearned income

                       

Taxable

  $ 13,670     $ (3,793 )   $ 9,877  

Tax-exempt

    89       (3 )     86  

Total loans, net of unearned income

    13,759       (3,796 )     9,963  

Mortgages held for sale

    23       (10 )     13  

Debt securities:

                       

Taxable

    (684 )     785       101  

Tax-exempt

    (8 )     5       (3 )

Total debt securities

    (692 )     790       98  

Federal funds sold

    (443 )     (78 )     (521 )

Restricted equity securities

    19       (4 )     15  

Interest-bearing balances with banks

    9,679       (4,785 )     4,894  

Total interest-earning assets

    22,345       (7,883 )     14,462  
                         

Interest-bearing liabilities:

                       

Interest-bearing demand deposits

    742       (1,942 )     (1,200 )

Savings

    (22 )     (42 )     (64 )

Money market accounts

    6,041       (15,686 )     (9,645 )

Time deposits

    1,986       (398 )     1,588  

Total interest-bearing deposits

    8,747       (18,068 )     (9,321 )

Federal funds purchased

    6,673       (4,024 )     2,649  

Other borrowed funds

    -       2       2  

Total interest-bearing liabilities

    15,420       (22,090 )     (6,670 )

Increase in net interest income

  $ 6,925     $ 14,207     $ 21,132  

 

Our growth in loans continues to drive favorable volume component change. The rate component was favorable as average rates paid on interest-bearing liabilities decreased 63 basis points while loan yields decreased 10 basis points. An increase in average equity contributed to a favorable volume component accompanied by an increase in average non-interest-bearing deposits.

 

Provision for Credit Losses

 

The provision for credit losses on loans was $6.5 million for the three months ended March 31, 2025, an increase of $2.1 million from $4.4 million for the three months ended March 31, 2024. The ACL at March 31, 2025, December 31, 2024, and March 31, 2024, totaled $165.0 million, $164.5 million, and $155.9 million, or 1.28%, 1.30%, and 1.31% of loans, net of unearned income, respectively. Annualized net credit charge-offs to quarter-to-date average loans were 0.19% for the first quarter of 2025, a 13 basis point increase compared to 0.06% for the first quarter of 2024. Nonperforming loans increased to $73.9 million, or 0.57% of total loans, at March 31, 2025 from $42.5 million, or 0.34% of total loans at December 31, 2024, and increased compared to $35.3 million, or 0.29% of total loans, at March 31, 2024.

 

Noninterest Income

 

Noninterest income totaled $8.3 million for the three months ended March 31, 2025, a decrease of $631,000 compared to the corresponding period in 2024. Service charges on deposit accounts increased $408,000, or 19.0%, to $2.6 million for the three months ended March 31, 2025, compared to $2.2 million in the corresponding period in 2024. Mortgage banking revenue decreased $65,000, or 9.6%, to $613,000 for the three months ended March 31, 2025, compared to $678,000 in the corresponding period in 2024. Net credit card revenue decreased $187,000, or 8.7%, to $2.0 million during the three months ended March 31, 2025, compared to $2.2 million during the three months ended March 31, 2024. Bank-owned life insurance (“BOLI”) income decreased $1.1 million, or 33.9%, to $2.1 million for the first quarter of 2025 from $3.2 million in the first quarter of 2024. During the first quarter of 2024, we recognized $1.2 million of income attributed to a death benefit related to a former employee in our BOLI program. Other income for the three months ended March 31, 2025, increased $307,000, or 44.2%, to $1.0 million when compared to the corresponding period in 2024. Merchant service revenue increased $2,000, or 0.3%, to $509,000 for the first quarter of 2025 from $508,000 in the first quarter of 2024.

 

Changes in our non-interest income, including percentage changes, are detailed in the following table:

 

   

Three Months Ended March 31,

                 
   

2025

   

2024

   

$ change

   

% change

 
   

(Dollars In Thousands)

         

Noninterest income:

                               

Service charges on deposit accounts

  $ 2,558     $ 2,150     $ 408       19.0 %

Mortgage banking

    613       678       (65 )     (9.6 )%

Credit cards

    1,968       2,155       (187 )     (8.7 )%

Bank-owned life insurance income

    2,137       3,231       (1,094 )     (33.9 )%

Other operating income

    1,001       694       307       44.2 %

Total noninterest income

  $ 8,277     $ 8,908     $ (631 )     (7.1 )%

 

Noninterest Expense

 

Noninterest expense totaled $46.1 million for the three months ended March 31, 2025, a decrease of $124,000, or 0.3%, compared to $46.2 million for the same period in 2024. Salary and benefit expense decreased $107,000, or 0.5%, to $22.9 million for the three months ended March 31, 2025, from $23.0 million for the same period in 2024. The number of FTE employees increased by 31, or 5%, to 636 at March 31, 2025 compared to 605 at March 31, 2024, and increased by 6, or 1%, from the end of the fourth quarter of 2024. Equipment and occupancy expense increased $165,000, or 4.6%, to $3.7 million for the first quarter of 2025 from $3.6 million in the first quarter of 2024. Third party processing and other services expense increased $572,000, or 8.0%, to $7.7 million for the first quarter of 2025 from $7.2 million in the first quarter of 2024. Professional services expense increased $469,000, or 32.0%, to $1.9 million for the first quarter of 2025 from $1.5 million in the first quarter of 2024. FDIC and other regulatory assessments decreased $1.1 million, or 26.9%, to $2.9 million for the first quarter of 2025 from $3.9 million in the first quarter of 2024. Other operating expenses decreased $175,000, or 2.5%, to $6.9 million for the first quarter of 2025 from $7.1 million in the first quarter of 2024.

 

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Changes in our non-interest expenses, including percentage changes, are detailed in the following table:

 

   

Three Months Ended March 31,

                 
   

2025

   

2024

   

$ change

   

% change

 
   

(Dollars In Thousands)

         

Noninterest expense:

                               

Salaries and employee benefits

  $ 22,879     $ 22,986     $ (107 )     (0.5 )%

Equipment and occupancy

    3,722       3,557       165       4.6 %

Third party processing and other services

    7,738       7,166       572       8.0 %

Professional services

    1,933       1,464       469       32.0 %

FDIC and other regulatory assessments

    2,854       3,905       (1,051 )     (26.9 )%

Other real estate owned

    33       30       3       10.0 %

Other operating expense

    6,948       7,123       (175 )     (2.5 )%

Total noninterest expense

  $ 46,107     $ 46,231     $ (124 )     (0.3 )%

 

Income Tax Expense

 

Income tax expense increased $5.3 million, or 49.6%, to $15.9 million in the first quarter of 2025, compared to $10.6 million in the first quarter of 2024. Our effective tax rate was 20.06% for the first quarter of 2025 compared to 17.50% for the first quarter of 2024. We recognized a reduction in provision for income taxes resulting from excess tax benefits from the exercise and vesting of stock options and restricted stock during the first quarters of 2025 and 2024 of $470,000 and $204,000, respectively.

 

We own real estate investment trusts for the purpose of holding and managing participations in residential mortgages and commercial real estate loans originated by the Bank. The trusts are wholly-owned subsidiaries of a trust holding company, which in turn is an indirect wholly-owned subsidiary of the Bank. The trusts earn interest income on the loans they hold and incur operating expenses related to their activities. They pay their net earnings, in the form of dividends, to the Bank, which receives a deduction for state income taxes.

 

Critical Accounting Estimates

 

The accounting and financial policies of the Company conform to U.S. GAAP and to general practices within the banking industry. To prepare consolidated financial statements in conformity with U.S. generally accepted accounting principles, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and future results could differ. The allowance for credit losses is particularly subject to change.  Information concerning our accounting policies with respect to these items is available in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Like all financial institutions, we are subject to market risk from changes in interest rates. Interest rate risk is inherent in the balance sheet due to the mismatch between the maturities of rate-sensitive assets and rate-sensitive liabilities. If rates are rising, and the level of rate-sensitive liabilities exceeds the level of rate-sensitive assets, the net interest margin will be negatively impacted. Conversely, if rates are falling, and the level of rate-sensitive liabilities is greater than the level of rate-sensitive assets, the impact on the net interest margin will be favorable. Managing interest rate risk is further complicated by the fact that all rates do not change at the same pace; in other words, short-term rates may be rising while longer-term rates remain stable. In addition, different types of rate-sensitive assets and rate-sensitive liabilities react differently to changes in rates.

 

To manage interest rate risk, we must take a position on the expected future trend of interest rates. Rates may rise, fall or remain the same. Our asset-liability committee (“ALCO”) develops its view of future rate trends and strives to manage rate risk within a targeted range by monitoring economic indicators, examining the views of economists and other experts, and understanding the current risks that our balance sheet is exposed to. Our annual budget reflects the anticipated rate environment for the next 12 months.

 

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The ALCO employs modeling techniques such as net interest income simulations and economic value of equity simulations to determine what amount of the Bank’s net interest income is at risk given different movements in market interest rates. Simulations assume gradual and instantaneous (shocks) movements in market interest rates of up and down 100, 200, 300 and 400 basis points, when practicable. A set of Benchmark and optional scenarios are ran and results are compared to base model results to measure sensitivity to movements in market interest rates. The ALCO establishes limits for the amount of negative change in net interest margin in the first year, second year and two-year cumulative time horizon. Current policy limits for the 100 and 200 basis point shock and ramp scenarios in the first and second year range from -4% to -17%. The ALCO conducts a quarterly analysis of the rate sensitivity position, reviews established limits, and reports its results to our board of directors. As of March 31, 2025, there have been no significant changes to our sensitivity to changes in interest rates since December 31, 2024.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures.

 

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

 

We conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures under the supervision and with the participation of our management, including our CEO and CFO, as of March 31, 2025. Based upon the evaluation, our CEO and CFO have concluded that our disclosure controls and procedures are effective as of March 31, 2025.

 

Change in Internal Control Over Financial Reporting.

 

There have not been any changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II. OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

From time to time we may be a party to various legal proceedings arising in the ordinary course of business. Management does not believe the Company or the Bank is currently a party to any material legal proceedings, except as disclosed in Item 3, “Legal Proceedings”, in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and there has been no material change in any matter described therein.

 

ITEM 1A. RISK FACTORS

 

Our business is influenced by many factors that are difficult to predict, involve uncertainties that may materially affect actual results and are often beyond our control. We have identified these risk factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, which should be taken into consideration when reviewing the information contained in this report. There have been no material changes in the Company’s risk factors from those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

41

 

 

ITEM 5. OTHER INFORMATION

 

None.

 

 

ITEM 6. EXHIBITS

 

 

(a)

Exhibit:

 
    3.1 Restated Certificate of Incorporation as amended (incorporated by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q, filed on August 3, 2023).
    3.2 Certificate of Elimination of the Senior-Non Cumulative Perpetual Preferred Stock, Series A (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K/A, filed on June 28, 2016).
    3.3 Bylaws (Restated for SEC filing purposes only) (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed on April 4, 2014).
    4.1 Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form 10, filed on March 28, 2008).
    4.2 Revised Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed on September 15, 2008, Commission File No. 0-53149).
    10.1*# Letter Agreement, by and between ServisFirst Bank and Henry Abbott, dated as of April 21, 2025.
    31.01* Certification of principal executive officer pursuant to Rule 13a-14(a).
    31.02* Certification of principal financial officer pursuant to Rule 13a-14(a).
    32.01** Certification of principal executive officer pursuant to 18 U.S.C. Section 1350.
    32.02** Certification of principal financial officer pursuant to 18 U.S.C. Section 1350.
    101.INS* Inline XBRL Instance Document
    101.SCH* Inline XBRL Taxonomy Extension Schema Document
    101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document
    101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document
    101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document
    101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document
    104* Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

 

* Filed herewith

** Furnished herewith

# Denotes management contract or compensatory plan or arrangement

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

    SERVISFIRST BANCSHARES, INC.
     
Date: May 6, 2025 By

/s/ Thomas A. Broughton III

Thomas A. Broughton III

President and Chief Executive Officer

     
Date: May 6, 2025 By

/s/ David A. Sparacio

David A. Sparacio

Chief Financial Officer

 

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